Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Analysts, strategists and economists at Goldman Sachs detailed their bullish case for the Canadian oil and gas sector in a Wednesday report entitled Canada Energy Outlook - A cross-asset bull market. Here are some excerpts (my emphasis),
" Canadian economy and local producers will benefit from this recovery, especially following the recent large rebound in production … [analyst] Neil Mehta expects that the capex discipline of Canadian producers will lead to a strong positive FCF [free cash flow] inflection in 2021/2022 as commodity prices recover … Our positive view on SU is predicated on (1) balance sheet strength, (2) strong FCF generation, (3) integrated business model, with advantaged Canadian refining/retail platform, and (4) attractive valuation after recent underperformance versus peers … We believe both CNQ and MEG represent attractive stocks among our Canadian coverage for long-term leverage to an eventual oil price recovery, given the companies low-cost asset structures and Upstream exposure”
“@SBarlow_ROB GS is very bullish on Canadian oils” – (research excerpt) Twitter
Morgan Stanley is bullish on the global economic recovery firm-wide.
In a Thursday report, chief economist Chetan Ahya pushes back on institutional client skepticism regarding the global resurgence (my emphasis),
“Our view is that while the initial Covid-19 shock was deep, the supercharged recovery that ensued, supported by a timely, sizeable and coordinated policy response, meant that the damage to private sector risk appetite is limited. We see a strong growth cycle unfolding in EM, backed by favourable domestic and external tailwinds. This cyclical upswing will also help heal some of the issues, like public finances, which are perceived to be structural in nature. Finally on inflation, we see a strong case for inflation to cross 2% in 2022 in a sustained manner. The US would be back on its pre-Covid GDP path by 4Q21 and even by then, macro policies will remain very reflationary, creating the environment for a sustained rise in inflation. "
“SBarlow_ROB MS pushes back on recovery bears” – (research excerpt) Twitter
BofA Securities’ Research Investment Committee sounded a surprisingly bearish tone in their monthly report,
“In 2021 we expect a rebound in global economic growth and corporate profits, but only modest returns to risky assets and broad indexes. The US may not return to long-term trend growth until 2022, making us suspicious of an increasingly exuberant market. Today, bad news is good news: virus & economic stumbles pressure policymakers to do another round of stimulus. Next year, good news is bad news: vaccines, stimulus effects and market rallies will be the excuse for the sharpest fiscal tightening in US history … Five Surprises: Possible volatility-inducing 2021 events: 1. rising China debt defaults tighten credit & spark recession; 2. US zombie firm bailouts cap productivity; 3. persistent WFH caps inflation; 4. climate reformers accept nuclear; 5. big bipartisan industrial policy boom”
“@SBarlow_ROB BoA’s RIC report - a lot more bearish than I would have expected” – (research excerpt) Twitter
Newsletter: “How to use office REITs as a real-time market indicato” – Globe Investor
Diversion: “Erectile Dysfunction Drug and Anti-Depressant Accidentally Swapped in Factory’ – Gizmodo
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