Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

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

The most interesting phrase I read over the weekend was “bounce to malaise” from the JP Morgan economic research team,

“The bounce in consumer spending is likely to continue past midyear, spilling over to other components of activity. Trade flows from Asia began recovering in April, while next week’s China activity readings should show continued firming in May. Signs of an earlier pickup lead us to nudge down the 2H20 rebound but we continue to expect a record 32% ar surge in global GDP next quarter—down 3%-pts from last week. As this bounce takes hold, it will take time to distinguish whether we have embarked on a V-shaped recovery in the level of GDP or are tracking our forecast of a bounce to malaise. The path of inflation will also prove difficult to read. “

Story continues below advertisement

“@SBarlow_ROB JPM: V-shaped recovery or ‘bounce to malaise’?’ – (research excerpt) Twitter

***

Morgan Stanley’s U.K.-based strategist Andrew Sheets remains steadfast in the V-shaped recovery camp,

“We think that this cycle has been, and will be, more ‘normal’ than appreciated. A new cycle has started, and we think that investors should position as such. We think that stocks and credit will be modestly higher and tighter over the next 12 months, but the more compelling opportunity lies in traditional ‘early-cycle’ rotations: smaller and cyclical stocks in the US, value stocks outside it”

For the record, my view lies between JP Morgan’s and Morgan Stanley’s – “bounce to boredom” might cover it.

“@SBarlow_ROB MS: "we think that this cycle has been, and will be, more ‘normal’ than appreciated"’ – (research excerpt) Twitter

***

Story continues below advertisement

RBC economist Josh Nye believes that the negative effects of the economic slowdown on the domestic housing markets are only beginning to be felt,

“The oft-watched debt-to-income ratio has flattened out in the past few years but remains close to a record high. The more relevant debt service ratio (measuring households' ability to manage high debt loads) declined for a second straight quarter, with early mortgage deferrals providing some help. But debt servicing costs remain historically elevated, even in the current low interest rate environment. These number are a reminder (if one was needed) of the high household debt levels that have long worried economists and policymakers…. labour market shock hasn’t yet turned into a debt servicing emergency … The problem is those solutions are temporary. Recent Bank of Canada analysis suggested expiry of deferrals and income support programs later this year—when the labour market still hasn’t fully healed from the COVID-19 shock—will push mortgage arrears higher in early 2021…

“@SBarlow_ROB RBC: "Just the beginning of COVID-19 impact on household finances” – (research excerpt) Twitter

***

I quote Citi U.S. equity strategist Tobias Levkovich a lot, and it’s not just because he’s Montreal born and bred. His most recent research report carries an important and well grounded warning (my emphasis),

“The concept of money supply being so large that it overwhelms the economy and flows into asset prices has validity, but we have witnessed this lead to problems in the past. The post-LTCM monetary policy from Alan Greenspan in 1998 arguably exacerbated the tech bubble, which then ended with stock price collapse. Some economists believe that the housing bubble also was the result of excessively low interest rates allowed by the Fed. Hence, there are no “free lunches.” Economic progress must back up the stock market surge, or severe pullbacks are inevitable… The idea of abandoning fundamental principles is uncomfortable and contradicts years of research. Permabulls appear brilliant in rising markets, and permabears are prescient when share prices fall. With equities climbing 78% of the time, it pays to be an optimist, but too many indicators suggest caution now.

Story continues below advertisement

“@SBarlow_ROB Levkovich: "With equities climbing 78% of the time, it pays to be an optimist, but too many indicators suggest caution now” – (research excerpt) Twitter

“ @DiMartinoBooth Markets are in hysteria” – (chart of Citi’s Panic/Euphoria model) Twitter

***

Diversion: “ The Three Sides of Risk” – Collaborative Fund

Tweet of the Day:

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies