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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Morgan Stanley U.S. equity strategist Michael Wilson believes markets are range-bound, and he remains cautious,

“Testing the top of our range leaves us cautious rather than bullish. While we have been wrong on the magnitude of the impact of the Fed's pivot and the velocity of the YTD rerate, it doesn't change our broader call for a multi-year trading range of 2400 - 3000 for the S&P. With valuations at the high end of fair value and continued conviction that earnings estimates still need to be lowered , we would avoid betting on a melt up. An "insurance cut" by the Fed is a potential blind spot, but not a call we are ready to make. The high beat rate this earnings season is not getting us excited given how much estimates were previously lowered. We see a sequential increase in negative operating leverage - earnings growth is decelerating more than sales growth – as companies deal with rising labor costs, inventories, and mean reversion of above trend capex.”

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“@SBarlow_ROB MS' Wilson: SPX still rangebound, EPS estimates to trend lower” – (research excerpt) Twitter

***

Merrill Lynch strategist Michael Hartnett, contrary to Morgan Stanley, believes there will be a market melt-up led by technology stocks and lower-rated credit.

For Mr. Hartnett, the signal for mid-term market peak will be a weakening in the US dollar,

“Risk assets to rise led by “deflation winners” of credit, tech, US, all likely funded via profit-taking in EM; US$ appreciation signalling easing of global financial conditions hence global equities outside US will also likely remain bid; but only once dollar appreciation ends in late-Q2 (gold & tech will be the tells) will combination of equity inflows, global growth upside surprises & rising bond yields trigger “big top” of Wall St., in our view”

“@SBarlow_ROB ML is firmly in the melt-up camp:” – (research excerpt) Twitter

***

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The Financial Times turned its attention to Canadian politics, and not in a positive way,

“But experts say Mr Trudeau’s balancing act between pipelines and the environment has largely failed. The issue now threatens the survival of his Liberal government as it seeks re-election in October… A lot of people wondered how these two things made sense together, because you’re sucking and blowing at the same time,” said Chris Ragan, an economist and chair of Canada’s Ecofiscal Commission… “The carbon tax has become a very important cudgel for conservative politicians and Justin Trudeau is public enemy number one,” said Shachi Kurl, executive director of the Angus Reid Institute polling firm. “It exhorts voters who are angry over these issues, particularly those aged 55 plus, and we know they have a higher propensity to vote.”

“Trudeau loses grip in pipelines balancing act” – Financial Times (paywall)

***

Citi strategist Robert Buckland uses a proprietary “bear market checklist” to predict longer-term equity market tops. The good news is that very few of the conditions are there for a sustained downturn but, at the same time, some signs of cycle-ending euphoria are becoming apparent,

“Market participants have called this “the most miserable bull market ever”. We would be more worried if they stop saying that … Maybe, at last, we are entering the last phase of this bull market. Rising share prices finally suck in significant inflows so pushing up valuations and attracting more IPO sellers. CEOs get more bullish, which drives higher M&A and capex. Then the BMC would start hauling up the red flags.’ “

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“@SBarlow_ROB ... some signs of euphoria are appearing” – (research excerpt) Twitter

***

Tweet of the Day:

Diversion: “The Tragic Consequences of the NHL’s Science Denial” – The Atlantic (video)

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