Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The research team at RBC updated their top 30 global stock ideas,
“This list remains one of high-conviction, long-term ideas, with quarterly updates that enable dynamic changes into names that we think offer higher conviction upside potential. Since publishing our Q2 update on April 4, 2022, the Top 30 list has delivered a total return of -17.4% (in USD terms) versus our benchmark, the MSCI World Index, at -15.6%. Year-to-date, the list has delivered a total return of -14.0%, above the benchmark at -20.1%, and since inception of our quarterly list at year-end 2019, the Top 30 has delivered a total return of +20.8%, above the benchmark at +13.2%”
There are four changes to the list this quarter. Amazon.com Inc., Intuitive Surgical Inc., Louisiana-Pacific Corp. and Twilio Inc. have been removed in favour of AES Corp., American Tower Corp., Lonza Group AG and Veeva Systems Inc.
The remaining stocks on the list are Adidas AG, Alexandria Real Estate Equities Inc., Alimentation Couche-Tard, AltaGas Ltd., American international Group Inc., Anheuser-Busch Inbev SA, Brookfield Asset Management, Canadian Natural Resources Ltd., Canadian Pacific Railway Ltd., ConocoPhillips, CrowdStrike Holdings Inc., DuPont de Nemours Inc., Intact Financial Corp., M&T Bank Corp., Mastercard Inc., Mosaic Co., Palo Alto Networks Inc., R1 RCM Holdco Inc., S&P Global Inc., Shell PLC., Siemens AG, Stericycle Inc., Telus Corp., Transdigm Group Inc., UnitedHealth Group Inc., and Wesco International Inc.
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Citi economist Nathan Sheets details the significant easing in global supply chain pressures,
“Our Citi global supply chain pressure index showed an appreciable easing in June—its first meaningful decline since January. The good news is that the index’s retreat last month suggests that pressures in the global goods sectors, which have been a central driver of inflation, may finally be easing. The bad news is that this looks to be occurring on the back of a slowing in the global consumer’s demand for goods, especially discretionary goods, and thus may also signal rising recession risks … The index’s retreat in June reflected a marked easing in the data for global PMIs and inventories — Measures of both supplier delivery times and producer backlogs improved appreciably. While overall transportation costs look to have declined less sharply, even there the data showed a further drop in container shipping costs from China to the U.S. West Coast. Even as we highlight the June softening in supply-chain pressures, and its important implications, we also emphasize that this is hardly an “all clear” signal for supply chains.”
“Citi: “Our Citi global supply chain pressure index showed an appreciable easing in June—its first meaningful decline since January " – (research excerpt) twitter
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BMO chief economist Doug Porter describes the sharp decline in crude prices, an event which may prove a watershed moment where the primary market fears switch from inflation to recession,
“In a potentially huge move for the global inflation outlook, energy prices succumbed in a big way to mounting recession concerns on Tuesday. After wavering in recent weeks, crude went into full tumble mode, with Brent sliding more than $10/bbl and WTI down almost $9 to below $100. Importantly, wholesale gasoline prices went down by a similar percentage. Through much of the spring, gasoline had proven to be even more ferocious than crude costs, with refining capacity pinched. In turn, this amped up the pain for consumers (which was even more intense for those outside the U.S., given the strength of the greenback this year). While a deep dive in gasoline prices will do nothing for the upcoming June CPI release (out next Wednesday), it points to some major relief in the following month. Of course, this is only a start. Oil prices would need to stay down and other costs would need to relent to provide lasting relief for the inflation outlook. But it is a big step in the right direction.”
“BMO: ‘energy prices succumbed in a big way to mounting recession concerns on Tuesday’” – (research excerpt) Twitter
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Diversion: “The Best TV Shows of 2022 (So Far)” – The Ringer
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Scott Barlow