Skip to main content
top links

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

Citi strategist Alex Saunders warned that markets are complacent,

“Markets have ignored recession risks rallying from the October lows on “soft” or even “no”-landing fears. We think this is complacent. Our US economists still have a recession penciled in for the second half of this year. In addition, recent banking turbulence will result in a further tightening in credit conditions, shaving 0.5% of Q3/Q4 growth estimates. Model recession risks remain high, especially on our preferred US rates team model... Currently US bonds stand out as not having priced the recession yet. Our Asset Allocation (GAA) and US rates teams are overweight US real rates. In sectors, industrials have less priced in then tech. Our own regime model is also underweight equities and slightly short bonds - preferring Japan and peripheral Europe to US and other markets”


Goldman Sachs economist Jan Hatzius isn’t worried about a U.S. recession, even with financial system pressures,

“It is still too early to have a confident view on the implications of the current banking turmoil for the US economy. Our baseline expectation is that reduced credit availability will prove to be a headwind that helps the Fed keep growth below potential despite the support from rising real income and better global growth, not a hurricane that pushes the economy into recession and forces the Fed to ease aggressively. The risks are clearly skewed toward larger negative effects, and we have moved our subjective probability that the economy enters a recession in the next 12 months back up to 35% from 25%. However, this number remains well below the consensus of 60%”

“GS’s Hatzius: Bank turmoil not enough to cause recession” – (research excerpt) Twitter


BofA Securities strategist Savita Subramanian brought positive news for long term investors in U.S. stocks,

“Our S&P 500 outlook over the next 12 months is neutral, given the balance of risks and rewards, and in the near term, we see more alpha within the benchmark. But for long term investors, the S&P 500′s price to normalized earnings has explained 80%+ of subsequent 10-yr S&P 500 returns. It now suggests price returns of +5%/yr. Add ~2ppt of dividend yield and this rivals prospects for most other asset classes … But the probability of losing money in the S&P 500 drops from a coin flip (46%) to a 2- sigma event (6%) by extending one’s holding period from a day to a decade. Market timing is fraught with peril, and panic selling results in outsized opportunity costs (best days often follow worst days). Since the 1930s, missing the 10 best S&P 500 days per decade would have yielded 33% vs. ~19,000% by remaining invested”


RBC Capital Markets analyst Michael Tran sees limited upside for oil prices in the near future,

“The Bottom Line: This market is likely to ebb and flow between periods of headline-driven hurdles and intermittent spikes in multi-directional volatility. We continue to believe that the structural framework remains for a strong cycle to take place, but the market lacks acute catalysts at the moment. We expect WTI and Brent to average $81.25 and $85.50/bbl this year, respectively, followed by $84.50 and $87.75/bbl in 2024. Our marks currently sit 11% higher than the Brent forward strip for this year, and 18% higher for next. Aside from a major economic downturn, we do not expect to see an acute re-test of the lows, but we also recognize that the market is likely to remain polluted with near term macro noise”


Diversion: “Scientists Just Learned Something New About How Aspirin Works” – Gizmodo

Tweet of the Day: