Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC head of global energy research Greg Pardy has made four changes to the firm’s Global Energy Best Ideas, adding AltaGas Ltd. (ALA-T) and Callon Petroleum Co. while removing Shell PLC, California Resources Corp. and Range Resources Corp.. Performance of the sector top picks list has been strong,
“In July, the RBC Global Energy Best Ideas List was up 7.8% compared to the iShares S&P Global Energy Sector ETF (IXC) up 6.2% and a hybrid benchmark (75% IXC, 25% JXI – iShares Global Utilities ETF) that rose 5.0% on a sequential basis. Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 145.7% compared to the S&P Global Energy Sector ETF up 29.5%”
Outside of the names mentioned, the picks are Suncor Energy Inc. (SU-T), Topaz Energy Corp. (TPZ-T), Diamondback Energy, Permian Resources Corp., ARC Resources Ltd. (ARX-T), Tourmaline Oil Corp. (TOU-T), Canadian Natural Resources Ltd. (CNQ-T), Santos Ltd., SLB, Pembina Pipeline Corp. (PPL-T), Targa Resources Corp., Cheniere Energy Inc., Energy Transfer LP, Superior Plus Corp. (SPB-T), Marathon Petroleum Corp., and PG&E Corp.
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BofA Securities U.S. economist Michael Gapen has backed off on his call for a recession, now forecasting a soft landing,
“Recent incoming data has made us reassess our prior view that a mild recession in 2024 is the most likely outcome for the US economy. Growth in economic activity over the past three quarters has averaged 2.3%, the unemployment rate has remained near all-time lows, and wage and price pressures are moving in the right direction, albeit gradually … We revise our outlook for the US economy in favor of a soft landing, where growth falls below trend in 2024, but remains positive throughout our forecast horizon. We forecast US GDP growth of 2.0% (4Q/4Q) this year, 0.7% in 2024, and 1.8% in 2025. This is about 0.5pp and 0.7pp higher in 2023 and 2024 than we assumed previously. We still expect inflation to decelerate and remain on a path to 2.0%, but with a stronger forecast for activity and labor markets, inflation falls more gradually”
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Former CEO and co-chief investment officer of PIMCO Mohamed El-Erian warned investors to expect a bumpy road ahead for markets in a column for the Financial Times,
“The BoE still has a tough road ahead in its inflation fight. Meanwhile, as the more advanced ECB and Fed embark on the “last mile” of their anti-inflation mission, both will face trade-offs between meeting their common 2 per cent inflation target and maintaining financial and economic stability… In a world where manufacturing is under pressure and surplus savings are being depleted, fundamental support for market-wide price gains will lack the energy of the small set of stocks riding a huge secular wave … Given that China’s growth challenges are both cyclical and secular, the government’s traditional strategy of turbocharging markets through fiscal and monetary stimulus will prove less effective and more distortive”
“Investors should still expect a bumpy road ahead” – Financial Times (paywall)
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Diversion: “‘AI in current practice is deteriorating our theoretical understanding of cognition rather than advancing and enhancing it.“” - Psyarxiv
Scott Barlow