A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Merrill Lynch economist Ethan Harris’s forecast for global economic growth results in a “shocking conclusion,”
“Leading indicators of [corporate capital investment] have been weakening for a year now, and in the fall U.S. indicators started to turn down as well… Another sign of trouble comes from our Global Fund Manager Survey. Investors have gotten increasingly pessimistic about growth ... This has triggered a rapid change in their advice on how companies should use their cash flow …
"A shocking conclusion: In the past year our biggest fear has been that policy shocks would undercut confidence and growth expectations, undercutting a potential capital spending recovery. The evidence is building that fear is reality. As the U.S. government shutdown, the trade war, Brexit and other policy uncertainties continue, the risks to growth and capital spending in particular will continue to rise. While there has been a mini-rally in the markets in the past two weeks, the risks to global growth remain skewed to the downside”
“@SBarlow_ROB ML: global growth risks skewed to the downside” – (research excerpt) Twitter
“Pessimism is dramatically rising among global CEOs, survey shows” – CNBC
“@SBarlow_ROB BMO: "China’s economic growth slowed in Q4, and for all of 2018 the 6.6% increase was the smallest gain in nearly three decades." - (research excerpt) Twitter
“Oil drops nearly 2 percent as China slowdown bites” – Reuters
“ @enlundm Korean exports appears to have collapsed in January - bad news for global EPS growth!” – (chart) Twitter
“German economic indicator falls to four-year low, Zew survey finds” – Financial Times (paywall)
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Morgan Stanley equity strategist Michael Wilson, who had a terrific forecasting year in 2018, believes investors shouldn’t trust the current rally,
“A rebound off extremes and hope around political headlines have helped move the market higher, but we don't like the risk-reward of chasing stocks at these levels. Technically, we think the odds of a full or partial retest of the December lows are still relatively high … The bulk of earnings season is still ahead and we expect further downside in revisions … there could still be 20%+ downside to earnings revisions breadth for Discretionary, Health Care, Industrials, Materials, and Utilities.”
“ @SBarlow_ROB MS's Wilson: "bulk of earnings season is still ahead and we expect further downside in revisions" – (research excerpt) Twitter
“@C_Barraud 🇺🇸 #SPX | Largest Cuts to S&P 500 EPS Estimates in 4 Years for 1st Half of 2019 - Factset Earnings Insight *Link (p.2): bit.ly/2Mvjmet “ – (chart) Twitter
“ @bespokeinvest The revenue beat rate for Q4 earnings is sitting below 50% at the moment while the EPS beat rate is at 69.5%. Not good. $$” – (chart) Twitter
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MIT Technology Review warns U.S. environmentalists that they can’t deny science either with the New Green Deal,
“ In a letter to Congress last week, more than 600 environmental groups sought to define renewables even more narrowly, arguing that the ultimate proposal should also prohibit biomass and large-scale hydroelectric power. It adds that the groups … will oppose any climate legislation that promotes market-based mechanisms like carbon taxes or cap-and-trade programs…Everything we know from recent research indicates that nuclear, carbon capture, and hydropower are essential, and that carbon pricing could be among the most powerful tools for driving the transformation.”
“Let’s keep the Green New Deal grounded in science” – M.I.T. Technology Review
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Tweet of the Day:
Diversion: “Power Causes Brain Damage” – The Atlantic
Scott Barlow