A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
A new research report from UBS U.S. equity strategist Francois Trahan is provocatively titled If History Were A Perfect Guide … Stocks Would Be In A World Of Trouble Here,
“The earnings landscape has already deteriorated and will likely get worse: The consensus year-over-year growth rate in S&P 500 forward earnings is down to a mere 1% from a peak of 23% in September of 2018. Forward earnings are already contracting in the Midcap and Smallcap indices… If history were a perfect guide, the S&P 500 would trough in Q2 of 2020 and rebound thereafter: Should the economy bottom in Q4 of 2020, as interest rates suggest, then history argues the S&P 500 would begin to price in a sustainable recovery sometime between April and August of 2020… PMIs Argue That Forward EPS Growth Will Trend Lower For Another 6 Months”
“@SBarlow_ROB UBS: "If History Were A Perfect Guide … Stocks Would Be In A World Of Trouble Here" – (research excerpt) Twitter
“ @SBarlow_ROB UBS charts: "LEIs Like The ISM Argue For Slower Earnings …"” – (charts) Twitter
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Goldman Sachs U.S. economist Jan Hatzius is far more optimistic,
“Our [current economic activity indicator] for October has moved up a bit to 1.5%, just a tick below our Q3 GDP tracking estimate and consistent with H2 growth in the neighborhood of potential. From here, we expect modest improvement as the impulse from financial conditions turns more positive, the drag from the negative inventory cycle abates, and the Trump administration pivots away from trade escalation as the 2020 election approaches”
“@SBarlow_ROB GS: “we expect modest improvement as the impulse from financial conditions turns more positive, the drag from the negative inventory cycle abates” – (research excerpt) Twitter
See also: “ @SBarlow_ROB BMO: US Economy Bottoming?” – (research excerpt) Twitter
“@SBarlow_ROB Barclays: Manufacturing PMIs start to stabilize – (chart) Twitter
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A survey by insolvency company MNP found that almost half of Canadians expect the need to borrow to cover basic living expenses,
“Forty-seven per cent of respondents to a survey conducted on behalf of insolvency firm MNP said they don’t expect to be able to cover basic living expenses over the next year without taking on more debt… “Household debt has eased marginally and the current holding pattern on interest rates may be giving Canadians a sense of optimism about their finances,” said Grant Bazian, president of MNP LTD, in a release Monday. “Still, the fact remains that many are drowning in debt and most don’t have a clear path to repayment."
“47% of Canadians plan to borrow to cover basic costs, survey shows” – BNN Bloomberg
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Merrill Lynch foreign exchange analyst Bren Randol believes the loonie is set to fall,
“We are skeptical that the recent rally in global risk assets is sustainable in light of persistent policy uncertainty, which continues to pressure global growth and undermine much-needed capital flows into Canada. With current USD/CAD spot levels around 1.31, we think that CAD risk premium has been all but priced out. Absent a material improvement in the global backdrop, we therefore expect USD/CAD to resume overshooting levels consistent with equilibrium over the economic cycle. Given the fragility of the global cycle, we doubt that potentially-higher oil prices the result of supply disruption will benefit CAD”
“@SBarlow_ROB ML: “CAD weakness to reassert “’ – (research excerpt) Twitter
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Diversion: “Researchers have developed a true search-and-replace function for DNA” – M.I.T. Technology Review
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Scott Barlow