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Inside the Market Investors should prepare portfolios for a ‘major slowdown in the global economy’

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

StatsCan released retail sales data at 8:30 Wednesday. The overall number was in-line at 1.1 per cent month over month but the ex-autos version was a big positive surprise at 1.7 per cent versus 0.9 per cent expected.

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Reporting season for domestic bank stocks started with a thud as CIBC reported profits below expectations,

“Canadian Imperial Bank of Commerce opened a highly-anticipated earnings season with a flat second-quarter profit that was held back by weakness in the lender’s core domestic division. CIBC’s net profit in the three-month period ending Apr. 30 inched up two per cent year-over-year to $1.35-billion. On an adjusted basis, the bank earned $2.97 per share. Analysts, on average, were expecting $2.99. Adjusted earnings in CIBC’s core Canadian personal and small banking unit slipped three per cent to $571-million, with the bank pointing to an uptick in expenses and credit loss provisions.”

“CIBC profit misses estimates amid pressure in core Canadian unit” – BNN Bloomberg

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Nomura ‘s Richard Koo is among the most respected economists in Asia. In his most recent report, Mr. Koo predicted trade tensions to continue, with a global economic slowdown as a result,

“Unfortunately, a look at China’s official announcements suggests the most likely outcome is one in which conflict between the two nations continues to intensify, with the resulting uncertainty triggering a major slowdown in the global economy and the Chinese economy in particular. In that case, the economies of Japan and the many other nations that rely heavily on China are likely to decelerate as well.”

This scenario poses a significant threat to Canadian investors though commodity prices.

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“@SBarlow_ROB Koo: "a look at China’s official announcements suggests the most likely outcome is one in which conflict between the two nations continues to intensify"” – (research excerpt) Twitter

“@SBarlow_ROB Koo's theory on inner workings of Chinese trade politics also interesting” – (research excerpt) Twitter

“Fed’s Rosengren: Trade war is a ‘prominent downside risk’ and another reason for policy patience’ – CNBC

“After Huawei, U.S. could blacklist Chinese surveillance tech firm: media” – Reuters

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Merrill Lynch’s report on its clients’ investment flows uncovers a surprising degree of complacency,

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“Clients bought both single stocks and ETFs, with buying from institutional clients (for the second consecutive week) and hedge funds (for the first time in four weeks); private clients sold equities after buying the week prior… Foreign-exposed and cyclical sectors continued to see bigger inflows than domestically-oriented and defensive sectors last week, which may suggest optimism that a deal will be reached and global growth will continue to recover. In fact, all three client groups bought Energy, Industrials, and Financials last week, while all three sold Utilities, Health Care and Consumer Staples. Excluding the impact of buybacks, Energy saw the biggest inflows.”

“@SBarlow_ROB ML clients betting on trade deal” – (research excerpt) Twitter

“ @SBarlow_ROB ML: options underpriced” – (research excerpt) Twitter

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Tweet of the Day: @SBarlow_ROB Barclays: the Internet is slowing, what now?’ – (research excerpt) Twitter

Diversion: “ Why Celebrities Are So Susceptible to Grifters” – The Atlantic

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