Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BoA Securities' widely-read fund manager survey produced results so bullish it made me nervous from a contrarian perspective,
“Global growth & profit optimism at 20-year high; big majority (66%) now say macro in ‘early-cycle' phase, not recession; small majority of CIOs still want CEOs to improve balance sheet (47%), but desire for capex (the 2021 key to sustained economic recovery) on the rise (38%) … all-time high in FMS investors expecting a steeper yield curve (73%); allocation to equities (net overweight 46%) highest since Jan’18 and close to extreme bullish (i.e. >50%); allocation to cash (net 7%) lowest since Apr'15 … Nov FMS [fund manager survey] shows unambiguous rotation to EM, small cap, value, banks, funded by lower allocation to cash, bonds, staples”
“@SBarlow_ROB B of A: Fund manager survey getting * too* bullish” – (research excerpt) Twitter
“Investors in ‘full bull’ mode as vaccine hopes run high: BofA survey” - Globe Investor
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BMO economist Shelly Kaushik highlights new data showing Canada’s hottest housing markets,
“The MLS Home Price Index (HPI) for October highlights some key trends coming out of the pandemic-era economy and the resulting shift to working from home. The housing market has certainly benefitted from this shift, with October’s HPI up 10.9% y/y nationwide. We’ve also seen a move away from larger urban centres: the top five performers are smaller towns in southern Ontario, all within a few hours' drive from Toronto or Ottawa. In fact, Ottawa (+22.4% y/y) and Greater Montreal (+15.7% y/y) are the only big cities to outperform the national aggregate in October (the other outperformers include small- to mid-sized Ontario cities, the Toronto suburbs of Mississauga and Oakville-Milton, and Greater Moncton). The other big cities are lagging, with the energy-dependent cities of Edmonton (+1.5% y/y) and Calgary (+0.3% y/y) rounding out the bottom”
“@SBarlow_ROB BMO: Canada’s hottest housing markets” – (research excerpt) Twitter
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Morgan Stanley has added some detail to their bullish global outlook for 2021, providing their top cross-asset long/short trade ideas,
"Long Russell 2000 vs. S&P 500: We continue to believe that this cycle is more ‘normal’ than it seems, preferring to own exposure in early-cycle outperformers, one of which is owning small-caps over large-caps. Small-caps typically lead coming out of a recession. An expectation for more fiscal stimulus measures would likely be more supportive for small businesses … Long US Financials: Our US equity strategists view financials as a high-quality cyclical sector that should offer relative upside as an early-cycle outperformer. Coming out of a recession, we think it pays to buy stocks with lowest expectations … Long MSCI India vs. MSCI EM: Our economists see a strong recovery for India amid favorable global/domestic financial conditions, with India positioned to pick up manufacturing FDI [foreign direct investment] amid global value chain diversification, while structural reforms delivered through 2020 (including tax, land and labor reforms) leave our strategists more optimistic'
“@SBarlow_ROB MS: Top macro trade ideas for 2021” – (research excerpt) Twitter
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Newsletter: “Exponential growth in offshore wind power revenues ahead: Citi” – Globe Investor
Data: “The highest yielding stocks on the TSX, plus risk data” – Inside the Market
Diversion: “Almost one in five people who have had covid-19 go on to be diagnosed with a mental illness within three months of testing positive. Anxiety disorders, insomnia, and dementia were the most common diagnoses.” – M.I.T. Technology Review
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Scott Barlow