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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

The “buy the dip” investment strategy of putting more investment assets to work every time the equity market falls isn’t working anymore and investors aren’t taking well,

“Not only does the price action this year suggest we are in the midst of a bear market--more than 40 percent of the stocks in the S&P 500 are down at least 20 percent--but it also trades like a bear market. According to analysis from our QDS colleagues, buying the dip has not worked in 2018 for the first time since 2002. Such market behavior is rare and in the past has coincided with official bear markets (20 percent declines), recessions, or both.”

“@SBarlow_ROB MS: "buying the dip has not worked in 2018 for the first time since 2002"” – (research excerpt) Twitter


CIBC economist Avery Shenfeld has a warning for both investors and the Bank of Canada (my emphasis),

“No doubt central bankers would like to see rates rise to levels well above those that prevail today, given that they don’t currently have the requisite ammunition to fend off a slowdown. But, in the end, it will be the economy which dictates how high rates can rise, not the inclinations of central bankers. There’s already evidence that the effects of higher rates are showing up earlier and with more ferocity than in past cycles. With those effects only magnified as time passes, the Bank will ultimately fall short of reaching its goals for interest rates.”

“@SBarlow_ROB CIBC on Cdn eco: "There’s already evidence that the effects of higher rates are showing up earlier and with more ferocity than in past cycles"” – (research excerpt) Twitter


Year-ahead forecasts from major global research houses are being published, and as Merrill Lynch’s “It was fun while it lasted” title indicates, the mood is miserable. The Morgan Stanley excerpt above, noting that the S&P 500 “already trades like a bear market” is another good example. Here’s Merrill’s Ethan Harris,

“After two years of above-trend growth, the global economy is likely to slow back to trend over the course of 2019 due to a less friendly policy environment. The divergence between the Fed and other major central banks is likely to continue to surprise markets. Risks are skewed to the downside. The US-China trade war, Brexit and Quitaly loom large with a wide range of possible outcomes.”

“@SBarlow_ROB Tough reading today, like all the strategists on one of the 5 stages of grief for the bull market – (Merrill Lynch research excerpt) Twitter

“Goldman says it's time for equity investors to boost their cash” – Bloomberg


Merrill Lynch research department didn’t spare oil investors either, predicting a more rapid approach to ‘peak gasoline’ demand than the consensus,

“Transformation accelerates: 2025 = peak gasoline demand: We believe the accelerating pace of global transformation means “long term” threats are drawing much closer. Most notably, we forecast peak oil demand before 2030 – a long way from our original Thematic framework view in 2014 that oil would run out ~2050. This already imperils refining addition economics today given that we forecast peak gasoline demand in 2025, and may also affect the long-term oil price investors are prepared to discount in current share prices.”

“@SBarlow_ROB ML: "2025 = peak gasoline demand" – (research excerpt) Twitter

“Deep divisions hinder Canadian oil patch in fight of its life“ – Bloomberg


Tweet of the Day:

Diversion: “Why 536 was ‘the worst year to be alive’” – Science