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

Morgan Stanley’s global economics presentation was published Monday with the ominous title, This is not Goldilocks.

The Goldilocks investing environment – low rates and economic growth that’s not too hot and not too cold – has proven a profitable one over the past decade. The report is a presentation , so there’s not much text for me to excerpt, but I posted one of the more prominent charts on social media,

“Earnings Cuts Have Been Driven by Reductions in Margin and Sales Expectations” – (charts) Twitter

See also: “We Sold the Rally and Are Again Cautious on US Credit” – (charts) Twitter


Domestically, Bank of Montreal chief economist Doug Porter notes that the Canadian yield curve is 'close to the danger zone’,

“Partly due to the BoC’s dovish statement last week, long-term yields have plunged anew. This has taken bond yields all the way out to the seven-year area below the Bank’s overnight target rate of 1.75%. And, even the 10-year benchmark yield was flirting heavily with that threshold on Monday, with just a razor-thin 1 bp spread holding. This curve—10s minus overnight target rate— has inverted only twice in the past 20 years, and both episodes were soon followed by recessions...To be clear, the curve has not yet inverted, but it’s close to the danger zone.”

“@SBarlow_ROB BMO: Canadian yield curve close to ‘the danger zone’” – (research excerpt) Twitter


Merrill Lynch quantitative strategists also joined the bearish chorus Monday,

“Our US Regime indicator—which has been firmly in ‘late cycle’ since May ’18 – deteriorated further last month, and is now hovering on the border between the ‘late cycle’ and ‘recession’ phases. This economic cycle has been untraditional in that, as our economists point out, we it’s been one long soft patch with several mini downturns. Our indicator has fallen twice into ‘recession’ territory this cycle without an NBER-official economic recession: in ’11 – ‘12 during the European crisis and in ’14 – ‘15 during the commodity/manufacturing recession. Our work suggests that Quality, Low Risk and Large Size have historically outperformed in both the late cycle and recession phases … Quality has started to work”

“@SBarlow_ROB ML chimes in with The Bearish: “Our US Regime indicator... deteriorated further last month, and is now hovering on the border between the “late cycle” and “recession” phases” – (research excerpt) Twitter


Also from Morgan Stanley, analyst Adam Jonas reports on an “air pocket” for Tesla vehicle demand.

At the same time, Volkswagen is ramping up its production capacity for electric vehicles. I’ll be writing more about this for the Globe Investor newsletter out later on Tuesday,

“We see TSLA hitting an air pocket in demand that is coming earlier than we expected … We cut 1Q19 deliveries by 23% to 48k units, which we believe may be modestly below consensus to allow for sluggish US sales and potential impediments to international deliveries”

“@SBarlow_ROB MS: "We see TSLA hitting an air pocket in demand that is coming earlier than we expected" – (research excerpt) Twitter

“ Volkswagen plans to make almost 50% more electric cars than previously planned” – Bloomberg


Tweet of the Day:

Diversion: A bizarre story of amber smuggling in the former Soviet Union, “The young men and the sea: the outtakes” – FT Alphaville (free to read with registration)

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