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

Macquarie’s David Doyle has been among the more pessimistic economists where Canada’s outlook is concerned.

In a research report released Thursday, Mr. Doyle argued that the economy’s current dependence on real estate is setting us up for a nasty recession in 2020,

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“Risks appear modest near-term, but these are likely to rise in 2020 as global factors become less positive and mortgage renewal headwinds increase… vulnerability is unprecedented and emanates from record high employment in i) Construction, II) Finance, Insurance, and Real Estate (FIRE). Together, these sectors represent 18.7% of private sector employment, an all-time high. .. Our base assumes industry employment declines occur of similar magnitude to the 1980-2 and 1990-1 recessions. This leads to an increase in the unemployment rate to 9.8% (a rise of 4.5 percentage points).”

“@SBarlow_ROB Maquarie’s Doyle outlines three scenarios for Canadian recession in 2020” – (research excerpt) Twitter

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BMO’s chief strategist Brian Belski believes domestic bank stocks are set for a major rally,

“Financials have long been a proxy trade for broad Canadian market sentiment. Indeed, when foreign investor interest in Canada grows, Financials are the largest and most liquid stocks to own. Of course the corollary is when foreign interest wanes, Financials suffer the most. As such, we believe the recent underperformance of the sector is more related to general Canadian specific concerns around trade, housing, and energy rather than the fundamental outlook for Canadian Financials. Overall, fundamentals within the sector remain relatively strong, which is why we remain overweight the sector. Despite the recent weakness in Financials, fundamentals have remained strong. Valuations are now below historical norms, earnings continue to rebound from 2016 troughs, and profitability remains near long-term historical averages.”

“@SBarlow_ROB BMO’s Belski bullish on Canadian banks” – (research excerpt) Twitter

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Crude prices are sharply lower after Russian and Saudi officials noted discussions about production increases,

“Russian Energy Minister Alexander Novak and Saudi counterpart Khalid al-Falih met in St. Petersburg to review the terms of the global oil supply pact that has been in place for 17 months. The ministers, along with their counterpart from the United Arab Emirates, discussed an output increase of about 1 million barrels per day (bpd), sources told Reuters. .. “The debate about a possible relaxation of the production restrictions should preclude any renewed price rise,” Commerzbank analysts said.”

“Oil prices slump as OPEC and Russia weigh output boost” – Report on Business

“Oil heads for its first weekly decline in almost a month” – Bloomberg

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Goldman Sachs notes that 56 per cent of large cap U.S. mutual funds are beating the benchmark this year. In theory, this is how it’s supposed to work. No one manages risk in an index, so active managers should outperform in periods of volatility. Often, however, they don’t.

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“56% of large-cap mutual funds have outperformed YTD, on pace to be the best year since 2007. Overweights within outperforming sectors (Information Technology, Consumer Discretionary, Energy) and underweights within laggards (bond proxies) have supported fund returns this year.”

“@SBarlow_ROB GS: “56% of large-cap U.S. mutual funds have outperformed YTD”” – (research excerpt) Twitter

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Tweet of the Day:


Diversion: “The 10 most hated people on a plane” – Business Insider

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Scott Barlow, Globe Investor’s in-house market strategist, writes exclusively for our subscribers at Inside the Market.

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