Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
UBS’s U.K.-based economist Arend Kapteyn projects global GDP growth under different scenarios in a report released Monday,
“We now forecast -3% global growth in 2020, but on the optimistic assumption that restrictions get lifted in May. This report considers alternative scenarios: an extension of restrictions through mid-year and a failure of containment efforts with the virus coming back in waves till mid-2021. Those yield materially worse growth (-5.1%) and debt outcomes (30% of GDP increase in public debt) … Although markets will be still down 10% on the year, our model suggests about 8% rise from here to year end if lockdowns are lifted through May, and do not have to be reinstated. If the virus is not contained in H1, we see global equities falling through the March lows. In this situation, EPS should be lower by 25% over a two-year period.’
“@SBarlow_ROB UBS: "Although markets will be still down 10% on the year, our model suggests about 8% rise from here to year end if lockdowns are lifted through May" – (research excerpt) Twitter
“@SBarlow_ROB BMO: "every week of full-on closure effectively reduces annual GDP by roughly 0.7 percentage points" – (research excerpt) Twitter
Nomura quantitative strategist Masanari Takada follows speculative, algorithm-driven funds, and he sees them leading markets right now while human investors wait,
“Global equity markets extended their gains yesterday. Investors are probably finding it an unappealing time to enter into bearish trades. However, the buying of equities we are seeing has a strongly technical flavor, as it is apparently being led by trend following algos (CTAs, risk-parity funds). The machines may be getting back into the market, but human investors appear to be taking their time. With human market participants staying at home (both literally and figuratively), the machines have proceeded on their own to systematically buy up equities.”
“@SBarlow_ROB Nomura's Takada: "The machines may be getting back into the market, but human investors appear to be taking their time" – (research excerpt) Twitter
Goldman Sachs’ U.S. equity strategy team, led by David Kostin, is recommending investors implement a barbell portfolio strategy – a balance of reasonably-priced high quality (low debt) stocks and economically sensitive companies that will benefit from an economic recovery when it occurs.
The team provided a list of strong balance sheet companies with reasonable valuations. In order of financial strength, the list is led by Monster Beverage Corp., Skywork Solution Inc., IPG Photonics Corp., Regeneron Pharmaceuticals Inc., Arista Networks Inc., Texas Instruments Inc., Facebook Inc., Mastercard Inc., Garmin Ltd., and Alphabet Inc.
The list of cyclical stock options is ranked by year to date stock performance. The top of that list goes NVIDIA Corp., Intel Corp., Lockheed Martin, Keysight Technologies, Ecolab Inc., Air Products and Chemicals , Xilinx Inc., IDEX Corp., Illinois Tool Works and Xylem Inc.
“@SBarlow_ROB GS "high quality at a reasonable price" stock list” – (table) Twitter
“@SBarlow_ROB GS: "Goods-producing Cyclicals with limited direct-to-consumer revenue exposure and low inventory-to-sales ratios" – (table) Twitter
Newsletter: Goldman Sachs’ three-part portfolio strategy appeals to investors of all typed – Globe Investor
Diversion: “The 10 Most Uplifting Movies of All Time” – Cinefix (Youtube)
Tweet of the day:
Tyson Foods didn’t mince words in a full page @nytimes ad Sunday, warning, “the food supply chain is breaking.”— Mosheh Oinounou (@Mosheh) April 27, 2020
“As pork, beef and chicken plants are being forced to close...millions of pounds of meat will disappear from the supply chain,” John Tyson wrote. pic.twitter.com/0jJxrMOngw
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