Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Today is the one-year anniversary of news that Pfizer Inc. had developed a workable COVID-19 vaccine. A social media post of the headlines that day are interesting – cruise line and travel stocks surged prematurely for one. Seems like forever ago and less has changed than we might have expected at the time.
“Nikos Chrysoloras @nchrysoloras Bloomberg headlines a year ago today:” – Twitter
Morgan Stanley uses the OECD Coincident Leading Indicator (CLI) as an important input into their market forecasts. The CLI index now points to a slowdown in the U.S. economy,
“We compared the average factor returns in Slowdown and Expansion regime in US: i. Momentum and Growth factors will continue to outperform … Growth and Momentum factors historically performed well in Expansion and should continues to do well in Slowdown especially Momentum. Additionally, Quality should benefit from new backdrop with FCF [free cash flow] Yield and Return On Equity. ii. Deep Value factors still not favoured. Deep Value factors like Price-to-Book, Price-to sales, Shiller PE should continue to underperform in Slowdown with also more balanced measures of Value like Composite Value. "
“@SBarlow_ROB U.S. slowdown is (more) bad news for value investors,” – (research excerpt) Twitter
Citi analyst Anthony Pettinari notes the “once in a generation” U.S. infrastructure spending initiative as a buying opportunity for related U.S. stocks,
“Based on our analysis the bill’s $110B of incremental highway spending would lead, over time, to incremental [low to mid single digit] industry volume growth for Aggregates [gravel, crushed stone, sand, recycled concrete for example] producers, with knock-on benefits for Cement & downstream materials … Construction Materials names in our coverage have outperformed over the last 25 days (+14.7% vs S&P +7.6%) as the infrastructure bill edged closer towards passing … Our top pick in the space, VMC [Vulcan Materials Co.], is poised to see meaningful price/vol acceleration with the $1.2T infrastructure bill catalyst, but the stock still trades below its 10-yr avg. vs. the S&P … We believe the biggest beneficiaries across our industrial universe will be ACM [Aecom Technology Corp.] and J [Jacobs Engineering Group Inc.] (surface transportation, airports, and water infrastructure) and PWR [Quanta Services] & MTZ [MasTec Inc.] (power/grid and broadband”
“@SBarlow_ROB Citi: Biggest winners from ‘once in a generation’ U.S. infrastructure spend” – (research excerpt) Twitter
BMO economist Shelly Kaushik sees the drop in Canadian unemployment as making a Bank of Canada rate hike more likely,
“Apart from some COVID-wave hiccups, Canada’s unemployment rate has been steadily decreasing since hitting pandemic highs in the spring of 2020. Most recently, the Labour Force Survey noted a 0.2 ppt drop to 6.7% in October. And, with the improvement in the labour market comes additional eyes on the timing of the BoC’s first rate hike. Note that, in the previous cycle, the jobless rate came down to the mid-to-high-6% range in early 2017. And, the BoC started hiking rates soon after — starting in July of that year, to be exact. Plus, the central bank was working with a higher starting point then—the target for the overnight rate was at 0.5% at the time, compared to its current 0.25%. For the record, our current call is for the BoC to start hiking in mid-2022.”
“@SBarlow_ROB Falling unemployment leaves coast clear for BoC rate hike (BMO)” – (research excerpt) Twitter
Diversion: “Singapore to Stop Paying Medical Bills for Unvaccinated Covid-19 Patients” – Gizmodo
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