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Inside the Market Equity market ‘earthquake’ sees value stocks surge, FAANG drop

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

A remarkable turnaround in the relative performance of value and momentum stocks – value stock prices are surging while momentum stocks, including FAANG, are falling – is grabbing a lot of attention this week.

Steen Jakobsen, the chief economist and chief investment officer for Denmark-based Saxo Bank, described the trend as a “market earthquake,”

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“What: Momentum stocks “collapsing” vs. Value stock rising – A move which is an equity earthquake. Why: US interest rates have shifted up by 20 bps to 35 bps in a few days – a highly unusual move considering that FOMC is next week and a minimum of 25 bps cut is fully priced in. Comment: Value stocks = Banks, Mining companies & Energy mainly. Momentum = Technology, Entertainment, consumer stables. Value is cheap – dirt cheap – and now the forceful move up in US interest rates has made “models” buy value and sell momentum as value stocks is similar to being long interest rates (through banks)”

“Macro Digest: There has been an equity earthquake!” – Saxo Bank

“Investors unwind bearish bets as optimism grows on trade and stimulus” – Reuters

“Momentum stocks come to a sudden stop” – Bloomberg

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Citi’s Chris Montague detailed the best and worst performing investment themes in September and provided stock ideas attached to the stronger strategies,

“Leading the top quintile Global Theme Machine rankings in September, we find P&C Pricing, with perennial Themes also featuring too: World Champs, Education, FinTech, MedTech, Healthcare IT, Global Buybacks, Cloud Computing, to pick out a few. 90% of the top quintile remains unchanged. In the least attractive quintile, we find AgTech rooted to the foot, alongside Light-Weighting of Cars, Deepwater, Timber, BioTech and Electric Vehicles, to mention the bottom six Themes.”

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“SBarlow_ROB C: best and worst performing investment themes” – (research excerpt) Twitter

“ @SBarlow_ROB C: stocks attached to investment themes” – (full tables) Twitter

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Crude prices are higher but most of the news seems pessimistic,

“Global oil demand will peak in three years, plateau until around 2030 and then decline sharply, energy adviser DNV GL said in one of the most aggressive forecasts yet for peak oil. Most oil companies expect demand to peak between the late 2020s and the 2040s. The International Energy Agency (IEA), which advises Western economies on energy policy, does not expect a peak before 2040 … “The main reason for forecasting peak oil demand in the early 2020s is our strong belief in the uptake of electric vehicles, as well as a less bullish belief in the growth of petrochemicals,” Sverre Alvik, head of DNV GL’s Energy Transition Outlook (ETO), said in an email to Reuters.”

“Oil demand to peak in three years, says energy adviser DNV GL” – Reuters

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“ Oil could slump to near $50 a barrel prompting deeper #OPEC+ production cuts, Trafigura says” – Bloomberg

“OPEC cuts 2020 oil demand forecast, urges effort to avert new glut” – Report on Business

“Oil prices gain after U.S. inventories fall” – Reuters

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Tweet of the Day:

Diversion: “This pub in Ireland is over 1,100 years old” – Bloomberg

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