Behold the ‘chart of shame’: S&P 500 vs. everyone who said the market was about to crash

A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Canadian GDP was reported at 2.4 per cent year-over-year at 8:30 a.m. ET Thursday relative to consensus expectations for 2.3 per cent.

Compared to the first quarter, the economy rocketed to an annualized pace of 2.9 per cent in the period from April 1 through June 30, compared with a slightly revised annual pace of 1.4 per cent in the first three months of 2018, the agency said. On that basis, economists had expected an annualized pace of 3.0 per cent for the second quarter.

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The stakes are high in Canada U.S. trade negotiations and the wailing and gnashing of teeth directed at minister Freeland and her team has reached fever pitch. News today from multiple sources, however, is encouraging,

“Both Mr. Trump and Foreign Minister Chrystia Freeland said talks this week have made progress and said a deal could be had by the end of the week. Canada has offered to give American farmers more access to its protected dairy market in exchange for the United States preserving a key dispute-settlement mechanism … A senior Canadian official said late on Wednesday the two sides are still far apart on Chapter 19, the process Canada has used to fight back against punitive American tariffs on imports … Still, the official said negotiators believe there is a real chance talks will wrap on Friday with a trilateral deal. “

“Canada, U.S. say NAFTA agreement within reach” – Globe and Mail

“Canada's Trudeau says NAFTA deal possible by Friday” – Reuters

“Canada's Freeland says NAFTA trade talks with U.S. 'very intense'” – Reuters

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Behold the chart of shame,

“[Technical analyst] Jon Boorman calls out the likes of former congressman Ron Paul, who last year forecast a 50% correction, and MarketWatch’s own Paul Farrell, who predicted a “100% risk of a 50% crash if Trump wins the nomination.” Then there’s the epic “sell everything” calls from RBS in January 2016 and again from Jeff Gundlach a few months later. The most recent fail came from Morgan Stanley MS, -0.10% , which forecast “the selling has just begun” in July.

One thing they all have in common: Complete wrongness.”

“Chart of shame: The S&P 500 vs. everyone who said the market was about to crash” – Marketwatch

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Bearishness on high-risk market sectors continues to build even as some equity markets hit new highs. Nomura quantitative strategist Masanari Takada writes,

“The tilting of factor performances towards low-volatility and quality can be regarded as evidence of subdued risk appetite. Contrary to the firmness in DM equity indices, many global equity funds are maintaining a cautious attitude to risk at the moment. If a re-acceleration of global economic momentum was fully priced in, then one would expect value to have been the preferred factor.”

The widespread de-risking extends to emerging markets debt which, given the close relationship between the S&P/TSX Composite and developing world assets, could turn in to a problem for Canadian investors.

“@SBarlow_ROB Nomura: “ tilting of factor performances towards low-volatility and quality can be regarded as evidence of subdued risk appetite”” – (research excerpt) Twitter

“@tracyalloway Flows into emerging market debt funds now negative for the year. MOST:” – (chart) Twitter

“FAANG short bets have jumped 40 percent in the past year, to $37 billion” – Bloomberg

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Tweet of the Day:

Diversion: “While examining the invasive python population in Florida, researchers stumbled across the unexpected: a kind of hybrid super snake” – ABC News