Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
It’s “Outlook 2024 Season” when Wall Street firms attempt to gain attention for their forecasts by releasing them earliest.
Goldman Sachs is first out of the gate (from what I’ve seen) as U.S. economist Jan Hatzius soothes investors by arguing that “The hard part is over,”
“The global economy has outperformed even our optimistic expectations in 2023. GDP growth is on track to beat consensus forecasts from a year ago by 1pp globally and 2pp in the US, while core inflation is down from 6% in 2022 to 3% … More disinflation is in store over the next year. Although the normalization in product and labor markets is now well advanced, its full disinflationary effect is still playing out, and core inflation should fall back to 2-2½% by end-2024 … Most major DM [developed market] central banks are likely finished hiking, but under our baseline forecast for a strong global economy, rate cuts probably won’t arrive until 2024H2 … We expect returns in rates, credit, equities, and commodities to exceed cash in 2024 under our baseline forecast. Each offers protection against a different tail risk, so a balanced asset mix should replace 2023′s cash focus”
Bernstein analyst Gautam Chhugani published an open letter to investors about Bitcoin,
“Bitcoin today is a $682Bn asset, roughly equal to the market cap of Tesla ($706Bn), and bigger than Visa ($506Bn), JPMorgan ($416Bn) and Exxon ($412BN). After 14 years of existence, Bitcoin is still seen as a bad joke that happened… Many think it is used for illicit transactions, some think it is bad for the environment. Some call it without intrinsic value. And others think of it as an instrument of speculation and gambling. If you belong to this camp, this letter is for you … 1. Judge Bitcoin for what it is - good for something, not so good for something else. 2. Bitcoin does consume power, but how else do you secure a monetary network? 3. Bitcoin is open for everyone, but not a great place to launder money. 4. What is the intrinsic value of commodities? 5. What is wrong in making money on cycles? We believe, Bitcoin miners are a smart, high-beta way to gain exposure to Bitcoin, as Bitcoin transitions from a native community asset to global monetary asset, integrated with traditional finance via regulated ETFs”
The two stocks the analyst likes are Riot Platforms Inc. and Clearspark Inc.
Citi analyst Shreyas Madabushi detailed a widening surplus in global copper inventories, a trend that is not great news for my (thankfully small) holding in First Quantum Minerals,
“The global economic recovery remains fragile and uneven with renewed contraction in activity across the major economies. Copper consumption has so far stayed resilient amid EV and renewables strength. While risks to both cyclical and decarbonization demand segments could drive a widening surplus as we head into 2024, investor net short positioning suggests this is already being largely priced. Total copper consumption rose 3% y/y in September with the 3mma also up 3% y/y supported by auto strength (particularly EVs). However, we are bearish on the macro-outlook and related prospects for consumption — Global soft manufacturing indicators in China and the US rejoined Europe in contractionary territory in October. Our global copper end-use consumption for September remained broadly flat for 9M’23, while tracked copper consumption was running 1% y/y higher. Total copper consumption (including renewables and grid demand) for 9M’23 rose ~4% y/y. Inflationary pressures, geopolitical tensions, and the elevated interest rate environment all remain cyclical headwinds for base metals demand. We see a deepening refined copper surplus, already signalled by rising ex-China visible inventories”.
Diversion: “First planned small nuclear reactor plant in the US has been canceled” – Ars Technica