Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities commodity strategist Michael Widmer favours aluminum- and nickel-related miners over copper producers,
“While aluminium may face headwinds as China’s electricity market normalises, the country’s smelters will ultimately run into the 45Mt capacity cap, pushing prices higher. Nickel demand from EVs is expected to increase steadily, keeping the Class 1 refined market tight. Meanwhile, copper is most exposed to the unfolding economic slowdown, exacerbated by weakness in China’s property sector; that said, a normalisation of supply chains, some stimulus, and low inventories are still supportive for now, before the market flips into a surplus by 2023E.”
Mr. Widmer also sees upside for platinum as auto production recovers and expects weakness in iron ore and lithium due to global surpluses. The bearish view on copper is a bit surprising in light of the metal’s use for decarbonization efforts.
“BofA likes aluminum and nickel over copper for 2022″ – (research excerpt) Twitter
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Widely followed Goldman Sachs U.S. equity strategist David Kostin released a relatively bullish set of targets for the S&P 500 while providing recommendations on sector positioning,
“Our S&P 500 year-end 2022 target equals 5100, representing a price gain of 9% and a total return with dividends of 10%. Our 3-month and 6-month interim targets are 4850 (+3%) and 5000 (+6%) and reflect the supportive equity investment backdrop we anticipate during 1H. Three recommendations: (1) Supply chains are beginning to normalize and cyclical equities including “reopening” stocks should outperform; (2) labor market tightness will persist and investors should avoid firms with high labor costs relative to EBIT; and (3) bond yields will rise and fast-growing stocks valued entirely on long-term growth expectations are vulnerable to rising rates or disappointing sales vs. growth stocks with high margins.”
The ' stocks valued entirely on long-term growth expectations’ warning is squarely pointed at expensive technology stocks.
“2022 SPX targets from GS” – (research excerpt) Twitter
“Goldman Sachs forecasts modest rise for S&P 500 index in 2022″ - Globe Investor
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Also from BofA, the firm’s head of research, Candace Browing, summarizes analyst Vivek Arya’s bull case for chip maker NVIDIA Corp.,
“Vivek Arya closely studies the latest trends from Top500.org, a list of the most powerful machines for high performance computing (HPC) applications, since they often inform tomorrow’s cloud/enterprise patterns. While the US has gained ground over the past 6 months, it’s still below a high of 34% share back in 2016. Since then, China has taken the #1 spot globally. While China leads in the number of total machines, the US retains the top performance spot. Of the Top 500 supercomputers, 30% use accelerators - a leading indicator for cloud adoption. Vivek Arya tells us Buy-rated NVIDIA dominates this space, and can be found in 95% of these accelerated systems. Following strong quarterly results, NVDA remains the top sector pick and is uniquely able to take advantage of the largest/fastest growth markets in tech including cloud computing, AI, gaming, metaverse and autos.”
" Supercomputers provide another bullish driver for NVDA” – (research excerpt) Twitter
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Diversion: “Get Used to Expensive Coffee. And It’ll Probably Taste Worse Too” – Bloomberg
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Scott Barlow