A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Markets were tentative Monday on reports that president Trump is set to announce another US$200-billion in tariffs on Chinese goods,
“U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, a senior administration official told Reuters on Saturday. The tariff level will probably be about 10 percent, the Wall Street Journal reported, quoting people familiar with the matter. This is below the 25 percent the administration said it was considering for this possible round of tariffs.”
Chinese officials have warned that they will not take these measures lying down,
“China will not be content to only play defense in an escalating trade war with the United States, a widely read Chinese tabloid warned … “We are looking forward to a more beautiful counter-attack and will keep increasing the pain felt by the U.S.,” [a] Chinese-language column said.”
None of this is good news for investors or consumers.
“Trump 'likely' to announce new China tariffs as early as Monday: source” – Reuters
“China paper warns it won't play defense on trade as Trump lauds tariffs” – Reuters
“Shares knocked lower after new U.S. tariff threat on Chinese goods” – Reuters
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Ritholtz Wealth Management’s Michael Batnick found one of the best quotes I’ve heard regarding behavioural investing, even if the author was using it for politics, not markets,
“My NYU colleague Jonathan Haidt, an inspiration, argues people are more like lawyers building a case for their gut feelings than judges reasoning toward truth.” – I2Inc
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Theme-based investing reports are rarely useful in my experience but Citi’s Global Theme machine is an exception. The most recent publication highlights share buybacks as the most promising investment strategy in the coming 12-18 months,
“Our Equity Strategy team argues that De-equitisation remains a key global investment theme for the next 12-18 months, noting that it makes sense for companies to de-equitise, and use cheap financing to buy back their own shares - and the Theme Machine ranking agrees, ranking it #1 in our latest analysis. Also screening themes that are attractively globally are Artificial Intelligence, Medical Tech, with Virtual Reality, Defence, Value Healthcare Spend & Healthcare IT also breaking into the Top Quintile.”
The report also sites health care technology as a strong candidate for outperformance. I discussed this in Friday’s Globe Investor newsletter.
“@SBarlow_ROB C sees share buybacks as top performing strategy in next 12-18 months “ – (research excerpt) Twitter
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Morgan Stanley strategists have been, in my opinion, the best market forecasters in 2018.
In a Monday report , U.S. equity strategist Michael Wilson reiterated his prediction that inflation pressures are set to rise, and will threaten profit margins and stock prices,
“Margins Are the Key for How Much Earnings Will Grow in 2019. Our view is less optimistic than the consensus as we think second order effects of tax cuts are negative for margins while productivity boost will be slower to materialize thanks to limited slack in the economy and shrinking labor supply.”
“@SBarlow_ROB MS warns on profit margins” – (research excerpt) Twitter
“High U.S. stock valuations hinge on inflation, interest rates” – Reuters
“@SBarlow_ROB C sees share buybacks as top performing strategy in next 12-18 months “ – (research excerpt) Twitter
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Tweet of the day:
Diversion: “America’s Obesity Problem Is Getting Even Worse” – Gizmodo
Scott Barlow