Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The energy research team at Scotiabank has turned cautious on crude prices,
“We believe the global oil market will face near-term pressures from a supply and demand perspective in 1Q24. We think macro picture will begin to improve by 2Q and reach the high end in 3Q24 before moderating in 4Q24. Thus, macro headwinds construe near-term risk to the downside in 1H24 with S&D tailwinds increasing upside risks in the second half of the year. Longer-term, we continue to forecast relatively flat demand growth for OECD countries and expect China’s growth rate to face a noteworthy slowdown. We have fine-tuned our Brent price forecasts to $81 and $80 for 2024 and 2025, respectively, down from the previous $85 for both years. There is no change to the longer-term outlook; we still think prices will ultimately settle in the $65-$70/bbl range within several years. We project $75/bbl Brent for 2026, and $65/bbl for 2027-2028 … We expect global oil demand to increase1.2-1.3 million barrels per day (mmbbl/d) in 2024 and 1.0 mmbbl/d in 2025 … On the supply front, we expect U.S. crude and condensate volumes to increase 600 mbbl/d in 2024, notably less than the near 1 mmbbl/d that constituted one of the oil market’s biggest surprises in 2023… Beyond the US, we forecast additional output from Argentina, Brazil, Canada, Guyana as well as Iran and Venezuela within OPEC. "
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The results of BofA Securities’ monthly fund manager survey (FMS) are out and summarized by investment strategist Michael Hartnett,
“Investors least pessimistic on global growth since Feb’23, on profits since Feb’22; ‘soft/no’ landing say 79% vs. 17% say ‘hard’ landing; in contrast, for 1st time since May’22, investors expect China growth to weaken. On Rates, Crowds & Tails: both bond & equity investors say Fed #1 driver of price in ‘24; record optimism on rate cuts (just 3% expect higher rates), but dip in optimism on bond yields; most crowded trade “long Magnificent Seven” & ‘long-duration tech’ [high growth technology stocks] best way to play rate cuts, no longer “long 30-year Treasury.” On AA, Regions & Sectors: rotation out of bonds into cash, out of banks into REITs (12-month high); global equity OW trimmed but largest OW in U.S. stocks since Dec’21; mass preference for “high-quality” but 1st time since Jun’21 small-cap preferred to large”
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Citi strategists led by Chris Montagu monitor over 90 global investment themes covering over 5000 global companies to assess the success and attractiveness of each. Mr. Montagu published an update overnight,
“Technology and Financial Technology accounts for nine of the top ten ranked themes at the end of 2023. These include core areas such as Cybersecurity, Software as a Service and IT Services, but also frontier developing themes like Smart Grids and Smart Home which have a sustainability angle too. Risky Business is the highest ranked theme supplanting Mobile Payments from its 7-months lead. Risky Business captures the industry specific cyclicality of P&C insurance margins and our analysts see the potential for near-term margin expansion in that space … The lowest ranked themes consist mainly of environmental themes. Sustainable Materials is the worst ranked of these as it scores poorly on all but Valuation. The worst performing of the low ranked themes was Digital Leisure which also scores poorly on all six styles and had a return of just 3.9% in December. Novel Biothreats continues to be the lowest ranked theme which together with Digital Leisure may reflect the unwind of pandemic economics.
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Diversion: “The Winners and Losers of the 75th Emmy Awards” – The Ringer
Scott Barlow