Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Jean-Michel Gauthier still favours U.S. equities over Canadian, but the preference is fading as cyclical stocks rebound,
“Global Value performance sputtered post Fed meeting, while Growth/Quality found a second wind, outperforming significantly. Sustained outperformance from Cyclicals and Resources is leading to a broad Momentum shift away from Defensives. For now, our global model remains with a heavy defensive tilt, but it is much more selective (Healthcare and Staples) and melting under the summer sun. Technology is rising fast in the rankings (second best overall), while Materials and Communications also jumped to OW. Not coincidentally, our beta adjustment turned positive for July.
US over Canada. While the US preference moderated a tad from last month, Canada significantly lags behind the US in the key sectors of Technology, Healthcare, Communications, and Energy. Canadian Financials and Materials/Gold do keep an edge. Overall, Canada remains a Value play relative to the US. The US enjoys a visible Momentum and Quality advantage over Canada”
“@SBarlow_ROB BNS still favours U.S. over Canada” – (research excerpt) Twitter
If Citi strategist Robert Buckland is right, investors can forget about following markets for the next year,
“We expect global equities to still be around current levels in 12 months. The bullish push from $6trn of global QE is likely to cancel out the bearish drag from the ongoing lockdown. Our top-down EPS forecast is 30% below the consensus for end-2021… Reasons To Be Bullish — Central banks are likely to buy $6trn of financial assets over the next 12 months, over twice previous peaks. The global economy is showing signs of recovery from the lockdown. Our Bear Market Checklist still shows only 6.5/18 red flags. Reasons To be Bearish — The world economy remains vulnerable to rising Covid19 infections. We think the bottom-up EPS consensus for end-2021 is 30% too high, suggesting that global equities are actually trading on a demanding 24x PE, not more reasonable 17x.”
BofA Securities U.S. quantitative strategist Savita Subramanian has updated her lists of top ten U.S. growth and value stocks.
Growth: Advanced Auto Parts Inc., Amazon.com Inc., Facebook Inc., Alphabet Inc., Marathon Petroleum Corp., Microsoft Corp., Netflix Inc., NRG Energy Inc., T-Mobile U.S. Inc and Vertex Pharmaceuticals Inc.
Value: Exelon Corp., Globe Life Inc., HCA Healthcare Inc., Marathon Petroleum Inc., Parker-Hannifin Corp., Philip Morris International Inc., TE Connectivity Ltd., T-Mobile U.S. Inc., Exxon Mobil Corp. and Zimmer Biomet Holdings Inc.
“@SBarlow_ROB BoA top ten picks for growth and value’ – (table) Twitter
It’s been a long, long time since investors had to worry about inflation pressured, but Credit Suisse global strategist Andrew Garthwaite sees a number of reasons to start,
“We think inflation can rise to c3% in the US/UK against a 10-year breakeven of c1.3% in the US. Why? i) we think fiscal policy remains expansionary until unemployment gets to politically acceptable levels (open ended fiscal QE); ii) higher minimum wages (Senator Biden has a plan for US$15 per hour); iii) de-globalisation; iv) a weaker dollar (almost always associated with a rise in inflation expectations); iv) the end of the 12-year downtrend in oil prices; vi) a lot of the disinflationary impact of disruptive technology has been seen (e.g. 32% of UK retail sales are now online); and vii) money supply leads inflation by 2.5 years. The Fed (and most central banks) will now also allow inflation to overshoot (unlike in 2011) and we think will cap bond yields (i.e. finance deficits).'
“@SBarlow_ROB Garthwaite says it’s (almost) time to worry about inflation” – (research excerpt) Twitter
Diversion: “Books We’re Reading This Summer” – The Atlantic
Tweet of the Day:
JPMORGAN: “.. we find a positive correlation between levels of [credit-card] activity three weeks ago and the spread of COVID-19 since then.” Of all indicators, “the highest correlation .. is the level of “card-present” (essentially in-person) restaurant spending ..” pic.twitter.com/V5JE7edAEE— Carl Quintanilla (@carlquintanilla) July 2, 2020
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