Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Citi chief U.S. equity strategist has doubled down on the bearish sentiment he published over the weekend in Market Strength Does Not Mean It Isn’t Vulnerable,
“Too many inexperienced investors are plowing into technology ideas that seem overvalued at 20x revenues, complaining that the often older investment community does not understand the disruption taking place and are too handicapped by traditional metrics. Such “new paradigm” arguments remind us of the 1999-2000 era which was the last time Panic/Euphoria was this ebullient for months before cracks emerged and indices fell … fund managers fully concede that the rate of profit expansion will slide but most fear more upside and relative performance issues than a double-digit decline at the moment, yet they prefer a higher quality tilt to portfolios. Unfortunately, this has become very consensus. Indeed, the paucity of immediate catalysts for a pullback is cited regularly, although we worry about higher taxes, cost pressures eating into profitability, tapering and more persistent inflation all coalescing in September”
“@SBarlow_ROB Citi: “Market Strength Does Not Mean It Isn’t Vulnerable”” – (research excerpt) Twitter
RBC’s head of global energy research Greg Pardy released his list of top stock ideas in the global energy sector. The report includes specific bullish comments on each company selected but there doesn’t appear to be an overriding quantitative selection process.
As for Canadian companies, Cenovus Energy Inc. is listed among the integrateds, the exploration and production subsector includes Canadian Natural Resources Ltd., Tourmaline Oil Corp., ARC Resources Ltd., and Tamarack Valley Energy Ltd.. Secure Energy Services Inc. is the domestic pick in oilfield services, AltaGas Ltd in midstream.
“@SBarlow_ROB RBC: “Global Energy Best Ideas” – (table) Twitter
Nomura strategist Naka Matsuzawa sees an increasing chance that the Federal Reserve will make a policy mistake,
“The deviations between the Fed and the market’s economic sentiment and monetary policy outlook have become quite conspicuous, and we think that the two are likely to collide head-on in the near future … In the US bond market, yields have declined since the CPI shock in mid-May, driven by super-long yields, which are the hardest for the Fed to control, but at present medium-term yields, which are in the Fed’s range of defense, are gradually coming under downward pressure as well. This is because near-term, as well as medium-term, Fed rate hike expectations are falling. The market has priced in 48bp in rate hikes over the next two years, and has not fully priced in the two rate hikes in 2023 predicted at the June FOMC. We think the market, regardless of the Fed’s intentions, is aware of the risks that: 1) governments could take hardline measures such as lockdowns in response to the renewed spread of coronavirus variants; and 2) risk-off flows stemming from China could grow more serious. The market’s iron rule is to avoid fighting the Fed, but the Fed itself will not blindly push through its course of action … (3) above in particular is reminiscent of the Fed’s policy error when it began raising rates at end-2015, even though the global economy and markets were in turmoil due to China’s decision to devalue RMB. "
“@SBarlow_ROB Nomura: “The deviations between the Fed and the market’s economic sentiment and monetary policy outlook have become quite conspicuous, and we think that the two are likely to collide head-on in the near future” – (research excerpt) Twitter
Diversion: “Why Even the Fastest Human Can’t Outrun Your House Cat” – Wired
Tweet of the Day:
US banks’ lending standards for business loans are the easiest in at least three decades. Demand remains tepid. pic.twitter.com/uQ5jBo3SX9— (((The Daily Shot))) (@SoberLook) August 4, 2021
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