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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

BofA Securities (formerly BofAMerrill Lynch) took a machete to their economic growth forecasts for Canada in a Thursday research report called “The economy is poised for a steep fall,”

“We revise once again our 2020 GDP growth forecasts for Canada to -5.0% from -1.5%. Our revision is based on two external factors and one internal factor. The first external factor is that our US economists cut their GDP growth forecast to -6.0% from -0.8%, which impacts Canada negatively mostly through trade. The second external factor is that our commodity strategists downgraded their oil price forecasts to $37/bbl from $45/bbl (average for the year) for Brent”

“@SBarlow_ROB "Canada Watch: The economy is poised for a steep fall" (BoA)” – (research excerpt) Twitter


Citi global strategist Jeremy Hale does not trust the partial equity market recovery that started on March 23, and now believes stocks will go back and re-test those lows,

“Despite the 18% trough to peak rally in the SPX, we feel that equities will re-test the lows over the coming weeks. Growth and EPS expectations still need to be revised lower, quicker, and until that happens, negative surprises are likely. Both valuation multiples and market technicals still suggest further downside. We are tracking sentiment, positioning and derivatives markets which don’t infer selling exhaustion yet… the GFC saw [U.S.] GDP -3.9%, and it’s easy to get to a GDP number much worse than that. Imagine output 50% below baseline for 2 months and this gives you -8% GDP … Meanwhile, the equity market isn’t priced for moderate EPS contraction, let alone recessionary contraction to the tune of 20-30%. Taking into account latest MSCI US index levels and end-March 12m forward EPS numbers, the market trades at 15x 12m forward earnings.”

“@SBarlow_ROB C's Hale thinks we're going to re-test the lows” – (research excerpt) Twitter


Also from Citi, and also regarding untrustworthy rallies, energy analyst Edward Morse is skeptical that crude prices can avoid the US$10 per barrel level despite Thursday’s rally,

“Today’s oil market rally of over 25% at times looks to be based on headlines from Moscow, Riyadh and Washington that cannot in the end stop prices from possibly falling below $10 before the end of April… However, the base supply numbers are hard to add up. What’s required is a good 10-m b/d immediate reduction in oil supply that is needed to prevent inventories globally from reaching tank tops. That is based on a demand drop globally of nearly 16-m b/d for all of 2Q, but peaking at 18.5-m b/d over the coming 8 weeks. Along with that is Citi’s calculation that logistical bottlenecks are such that storage might only be fillable at a constrained maximum rate of perhaps ~8-m b/d. That leaves the question open of how much of the 10-m b/d can in the immediate future come from voluntary cuts, and how much will have to come from producers being unable to sell crude”

“@SBarlow_ROB C's Morse: Oil still going to $10” – (research excerpt) Twitter

See also: “ @SBarlow_ROB GS: "Oil Policy coordination likely too little too late for (inland) crude markets" (March 31) – (research excerpt) Twitter


BofA quantitative strategist Savita Subramanian is my favourite source of analysis on U.S. earnings growth.

Ms. Subramanian reduced her profit forecasts and S&P 500 target is a Thursday report,

“It could take multiple years to recover lost corporate earnings … Our market outlook incorporates fundamentals, sentiment and technicals, and yields a year-end target of 2600, and a 12-month return forecast of 9% … Our 2020 forecast implies a 29% decline, worse than the average recessionary earnings drop of -20%. Companies will likely throw all ills into 2020 results with an obvious scapegoat, setting a clean slate for 2021… Setting the stage for better 2021 EPS: $145 to $155”

“@SBarlow_ROB Subramanian : ' It could take multiple years to recover lost corporate earnings "” – (research excerpt) Twitter


Diversion: “Amazon Keeps Finding New Ways to Screw Over Its Warehouse Workers Amid Covid-19 Pandemic” – Gizmodo

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