Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Nomura Research Institute’s chief economist Richard Koo concludes that “we are all Japanese now”,
“Two weeks ago the European Central Bank (ECB) revised its policies following an 18-month review of monetary policy. Key changes included a pledge to ease monetary policy forcefully when inflation or interest rates approach zero, the replacement of the existing inflation target of “below, but close to, 2%” with a symmetric target that pays equal attention to readings falling above and below 2%, and a pledge to refrain from preemptive inflation-fighting policies. These are not only quite similar to the new monetary policy approach adopted by the Fed in 2020 H2 but are also reminiscent of the policy “bazooka” unveiled by BOJ Governor Haruhiko Kuroda in 2013. In that sense, the Fed and the ECB have finally joined the BOJ to create a world in which ‘We are all Japanese now.’ … For monetary accommodation to raise economic growth, there must be more people who respond to the easier financial conditions by borrowing and spending. Otherwise, reductions in the policy rate will simply result in a transfer of income from lenders to borrowers and will not have a positive impact on the broader economy.
The reason why an increase in borrowings positively affects economic growth is that someone must spend money above and beyond their own income in order for the economy to grow.”
“@SBarlow_ROB Nomura’s Koo: “we are all Japanese now”” – (research excerpt) Twitter
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BofA Securities strategist Anthony Cassamassino updated the firm’s top U.S. stock ideas for the third quarter,
“The List for Q3 still includes eight longs and one short idea across 9 industries. The picks for Q3 are based on our views of potential significant market and business-related catalysts that we think will affect these stocks. Our Buys are Affirm Holdings, CNH Industrial, EPR Properties, East West Bancorp, FedEx, First Solar, Lamb Weston, and Exxon Mobil. The Underperform is Iron Mountain.”
BofA is reassigning coverage of U.S. Steel so it was removed from the list.
“@SBarlow_ROB BofA updates top 10 U.S. stock ideas for Q3” – (research excerpt, table) Twitter
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BMO chief economist Doug Porter notes that housing bubbles are a global phenomenon (which relates to Mr. Koo’s perspective above)
“Global real home prices are rising at their fastest pace in 45 years of records. According to data compiled (helpfully!) by the Dallas Fed, prices after inflation are now up more than 6% y/y, surpassing prior peaks in 2005 and 1989. The results are weighted by GDP in the 24 countries covered, so the U.S. leads the results. But the index covers the entire G7, as well as nations as diverse as Korea, Israel, South Africa, New Zealand and Slovenia. Among these nations, who is the frothiest of them all? Why, none other than Canada, where real prices are now up by more than 20% y/y (topping even New Zealand by this metric). Canada’s index is similar to the MLS HPI; while all the headlines last week were focused on the moderation in sales in June, the big story was that prices kept climbing (up 24.4% y/y).”
“@SBarlow_ROB BMO: housing bubbles are global but Canada still the frothiest” – (research excerpt) Twitter
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Diversion: “Biden Assembles the Final Member of His Big Tech Nightmare Squad” – Gizmodo
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Scott Barlow