Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities’ widely-read survey of portfolio managers sees ‘peak pessimism’, a potentially bullish sign for markets. Highlights from the survey include (my emphasis),
“BofA April FMS shows extreme investor pessimism…cash levels jump from 5.1% to 5.9% = highest level since 9/11 terrorist attacks; we say April = peak pessimism… 93% expect global recession in 2020; investors think global GDP cuts largely over, but global EPS cuts just beginning (rare dichotomy)… 52% believe economic recovery from COVID-19 shock will be U-shaped, 22% say W-shaped, just 15% say V-shaped …macro pessimism… BofA Bull & Bear Indicator remains pinned at 0.0, i.e. investor positioning very bearish; we say one last leg up in risk rally but take profits SPX 2850-3000”
“@SBarlow_ROB BoA: highlights from FMS” – (research excerpt) Twitter
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Also from BofA, my favoured source of analysis of earnings – quantitative strategist Savita Subramanian – published a U.S. earnings preview on Monday (my emphasis),
“14% of S&P 500 1Q20 earnings are slated to report this week, dominated by Banks. 1Q consensus EPS has fallen 13% from the start of the year to $35.22 (implying -10% YoY) - the biggest pre-season EPS cut since 1Q09′s ~30% cut (where 1Q09 saw a beat of 4%). Energy and Consumer Discretionary have seen the biggest downward revisions. Our forecast of $34.00 (-13% YoY) is 3% below consensus. Bottom-up EPS likely has further to fall. Whereas early reporters and macro data suggest a beat, data have dramatically deteriorated since late March.”
“@SBarlow_ROB BoA: "Bottom-up EPS likely has further to fall'” – (research excerpt) Twitter
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Canadians are braced for some historically bad economic data, but the recent indications on unemployment are still really unnerving,
“The headline 1 million decline in March was still a shock to look at. Unfortunately, April looks like it will be far worse. The federal government has received 6 million applications for support, and 5.4 million are now receiving emergency aid (nearly 30% of the labour force). That suggests employment could drop another 4-to-5 million in April.”
If investors consider this calamity in combination with near-record household debt levels, they can see why I’m not banking on a V-shaped recovery for the domestic economy.
“@SBarlow_ROB YEEEEIKES. BMO: "That suggests employment could drop another 4-to-5 million in April (to around the horizontal line)” – (research excerpt, chart) – Twitter
“Nearly 6 million people have applied for COVID-19 emergency benefits” – CBC
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As if we didn’t have enough to worry about, there could be an imminent shortage of meat as Citi analyst Joao Pedro Soares noted,
“BS USA announced today that its Greeley beef production plant in Colorado will remain temporary closed until April 24 due to the growing COVID-19 outbreak in the region. The company also announced a series of measures to help the local community, including funding to replenish personal protective equipment to essential workers and distribution of tests kits for low-income local residents. The news follows yesterday’s announcement from pork processor Smithfield Foods that its hog slaughter and pork processing plant in Sioux Falls, SD, would be indefinitely closed down.”
“@SBarlow_ROB Like we don't have enough to worry about ? (Citi)” – (research excerpt) Twitter
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Newsletter: “Why I’m worried about investor confirmation bias” - Globe Investor
Diversion: (News on the movie I’m most looking forward to) “ Denis Villeneuve’s Dune Reveals Its First Look at Paul Atreides” – Gizmodo
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Scott Barlow