Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Morgan Stanley’s equity strategy teams, led by Michael Wilson in the United States and U.K.-based Andrew Sheets, are the most bullish I know of among the major firms.
Mr. Wilson believes the bottom is in for U.S. stocks and expects the rally to continue. It is no surprise then that his list of top stock picks – The Fresh Money Buy List – is tilting towards cyclical companies that will benefit most from a recovering economy.
There are 11 stocks on the list – Citizens Financial Group Inc., Walt Disney Co., Humana Inc., Johnson & Johnson, engineering firm Linde PLC , Mastercard Inc., Microsoft Corp., Proctor & Gamble Co., apparel provider PVH Corp., S&P Global Inc., and T-Mobile U.S. Inc.
“ @SBarlow_ROB MS: "Shifting Our Fresh Money Buy List More Cyclical"” – (table) Twitter
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CIBC’s interest rate strategist Ian Pollick noted that monthly economic data is too delayed to help with market forecasting and valuation at present. He has attempted to uncover realtime data to help with gauging the current state of the Canadian economy (my emphasis),
“Using Apple Mobility Trends, we were able to get data that shows us the percentage change in people looking for directions, in various cities, relative to a baseline period prior to COVID-19. From the end of February until the middle of April, most Canadian cities saw their cumulative searches for directions on Apple Maps fall by nearly 80.0%. Over the past two weeks though we have seen a notable uptick in activity, with West Coast cities (i.e. Edmonton, Calgary) recovering more ground than the East… The interesting thing is that other micro-level data also show that the West Coast of Canada is moving ‘faster’ than the East. Google has provided data on smart-phone clustering around various locations in each province in Canada. For example, if a thousand Canadians stood near a business-park the data would indicate an increase in clustering around workplaces… For government-credit spreads, like municipal bonds, these are crucially important insights. For CAD rates, comparing domestic real-time activity to that in other countries, like the United States, is paramount to effectively trading cross-market spreads.”
“@SBarlow_ROB CM's Pollick: Alternative data shows Western Canada starting to recovery” – (research excerpt) Twitter
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Unlike Morgan Stanley, Citi economist Pernille Henneberg does not trust the current equity market rally at all,
“The divergence in financial and fundamental activity data is striking when considering the latest survey data for April … The gap in financial and fundamental data is unlikely to persist. Loosening of financial conditions can be important in supporting the economy particularly in a situation, like the current, where financial conditions are tight. But the latest loosening does not offset the economic impact from the tightening earlier in the year. At the same time, the sustainability of financial market valuation ultimately requires some better economic data and they are not around the corner.”
“@SBarlow_ROB C: "The gap in financial and fundamental data is unlikely to persist"” – (research excerpt) Twitter
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Interesting observation from Nomura strategist Masanari Takada. “CTA” refers to Commodity Trading Advisors – aggressive, speculative, usually algorithmically driven funds,
“ Of particular interest to us is that CTAs’ have built up a net long position in lumber futures and a net short position in copper futures. The historical record suggests that when CTAs hold long positions in lumber futures and short positions in copper futures, those positions may be reflective of an underlying expectation that US equities will outperform Chinese equities.”
“@SBarlow_ROB HUH. (Nomura): 'historical record suggests that when CTAs hold long positions in lumber futures and short positions in copper futures, those positions may be reflective of an underlying expectation that US equities will outperform Chinese equities" – (research excerpt) Twitter
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Column: “Today’s winning stocks could become tomorrow’s losers” – Barlow, Inside the market
Diversion: “The Ringer Guide to Streaming in May” – The Ringer
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Scott Barlow