A Canadian dollar coin is pictured in this illustration picture.Mark Blinch/Reuters
A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Oliver Korber, a foreign exchange derivatives strategist at Societe Generale, believes the loonie is set to rise sharply in the coming weeks to 80 US cents.
Mr. Korber cites technical reasons – the domestic currency is right at an important technical level that he expects it to break through – speculative bullish interest in futures markets and central bank monetary policy (the Fed is expected to cut rates while BoC Governor Stephen Poloz should stand pat),
“Digging into Societe Generale's 80-cent loonie call” – BNN Bloomberg (video interview)
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CIBC economists noted Canada’s weak wage growth,
“Over the past five years, annual real disposable income growth in Canada averaged less than 2% - a full percentage point below the pace seen in the US. A similar trend can be seen over the past year, as US wages rose notably faster”
Sluggish income growth is not a good sign for our consumer-driven economy or housing prices.
“@SBarlow_ROB CM: “Over the past five years, annual real disposable income growth in Canada averaged less than 2% - a full percentage point below the pace seen in the US” – (research excerpt) Twitter
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Goldman Sachs U.S. equity strategist David Kostin sees the S&P 500 more or less topped out at current levels as the profit outlook becomes more uncertain,
“The S&P 500 index trades near fair value relative to interest rates, although we believe policy uncertainty and negative revisions to 2020 EPS forecasts will limit equity upside. S&P 500 also trades at fair value relative to profitability; the current price/book of 3.5x is consistent with the index’s return on equity (ROE) of 18.9% based on history. The path forward for index ROE is likely to be challenging, although lower interest rates and lower tax rates may provide support.”
“@SBarlow_ROB Kostin: “while the S&P 500 index trades near fair value relative to interest rates, policy uncertainty and negative revisions to 2020 EPS forecasts will limit equity upside”” – (research excerpt) Twitter
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Citi equity strategist Tobias Levkovich thinks markets are too focused on the Fed and interest rate cuts,
“The Fed matters, especially when it adjusts rates sharply, but the Street needs to balance funding costs versus profit growth regarding the impact on overall share prices. The challenge currently is seemingly fair valuation, neutral investor sentiment and sluggish profit patterns, hindering major equity upside potential. The TINA (There Is No Alternative) mantra gets a bit tiresome after a 20%+ rally year to date. Arguably, buybacks and the return of retail investors could be helpful but there is no indication of the latter despite large cash holdings by US households. “
“@SBarlow_ROB C: too much attention on Fed” – (research excerpt) Twitter
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Tweet of the Day: "@tracyalloway11h One chart that shows the scarcity of yield in global markets. Via BofaML " - TWitter
Diversion: “One of the world’s most influential economists is on a mission to save capitalism from itself” – Quartz
Newsletter: “Is value investing really dead?” – Globe Investor
Scott Barlow