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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

It is rare that a prominent strategist like Morgan Stanley’s Michael Wilson is as adamantly bearish as he is. His monthly chartbook begins with a strong warning to clients,

“March is a high risk month for the bear market to resume. With the equity market showing signs of exhaustion after the last Fed meeting, the S&P 500 is at critical technical support. During bear markets Next Twelve Month EPS estimates typically flatten out between quarterly earnings seasons before resuming the downtrend. Stocks tend to figure it out a month early and trade lower and this cycle has illustrated that pattern perfectly. We think interest rates and the US dollar both need to fall for price to hold here. Conversely, if rates and the dollar move higher, the technical support should fail quickly. Valuation is broadly expensive. Equity Risk Premium reached the lowest point level since 2007, bottoming near 150bps.”

“‘March is a high risk month for the bear market to resume’ (MS)” – (research excerpt) Twitter


Scotiabank strategists have been traveling North America and finding very confused institutional investors,

“We held in-person meetings with institutional investors in Toronto, Montreal, and Mexico over the last few weeks. While we have been doing this job for some time now, we have rarely seen so much confusion among investors. Confusion regarding both the macro-outlook (soft landing, hard landing, no landing?) and portfolio positioning (offense, defense, barbell) is elevated. Here are some key highlights from conversations with clients: Conflicting macro signals. Positioning: From Defense to more Neutral. ‘Neutral’ would perfectly describe positioning given the lack of strong conviction on one side or the other. Sideways market. Earnings outlook: Buy-side banking on mild EPS decline. We have not seen many US equity bulls. Locals love Mexico . Conclusion. From our seat, our main concern remains the timing of the recession as we still doubt the economy will easily swallow 500+ bp of tightening. It may take longer for the economy/consumer to feel the impact than initially anticipated due to the strong job market and massive fiscal transfer during the pandemic, but all our indicators still point to more trouble ahead. Better opportunities on the long side will occur in coming months. High cash yields offer a decent alternative for now. Asset Mix Model: Our model still loves Cash.”

“Scotiabank strategists go traveling, find confused PMs” – (research excerpt) Twitter


Citi mining analyst Ephrem Ravi thinks copper prices are ahead of themselves, likes aluminum,

“Our take is that the headline [Chinese economic] data seem overly exuberant. Nevertheless, sentiment in China is clearly improving and we believe aluminium is best placed to benefit from that. In some small part the extremely strong headline print in China reflects seasonal factors, though the big factor leading us to question the data is that it appears every component saw massive increases … We continue to find that copper is pricing a strong China rebound already, and we recommend waiting for opportunities to establish long-term copper exposure at more than $8,500/t. We still expect an opportunity will come this year, based on our economists’ expectation for sticky inflation and the Fed responding accordingly (driving a sustained goods, construction and investment recession outside of China)”


Diversion: “A Snow-Buried California Declares State of Emergency” – Gizmodo

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