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

Morgan Stanley global economist Chetan Ahya is sticking with his forecast of a V-shaped economic recovery despite a resurgence in new COVID-19 cases (my emphasis),

“Local officials in new US hotspots have paused plans for reopening and are re-emphasising the need for face coverings and social distancing. This will likely lead to some loss of economic momentum in those areas, but continued improvement in most other states should lift the aggregates … We argue that the link between the labour market and consumption is looser than commonly thought… We expect US policy-makers to enact an additional US$1 trillion in fiscal stimulus … we think that public health systems will be better positioned to manage the second wave… We remain confident that the global economy will regain its pre-COVID-19 levels in four quarters and DM economies in eight quarters.”

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TD economists flagged a pandemic-related drop in immigration to Canada that might threaten housing prices,

“Canada’s population grew by 76k in Q1 for the smallest (Q1) increase since 2015. International migration accounted for 82% of total growth despite widespread travel restrictions introduced in March, but permanent resident admissions slowed to 4.1k for the month of April (5-year low), hinting at what’s in store for Q2. International migration has been a key tailwind to GDP in recent years (2019 real per capita GDP growth was 0.2%), and a large factor behind housing demand… The risk of lower immigration levels resulting from COVID has been flagged by the BoC and CMHC. CMHC has warned of a 9-18% drop in resale prices and also a short-term spike in rental vacancies that would add to disinflationary pressures after rents saw their largest declines on record in Apr/May.”

***

The earnings revision ratio – the number of stocks representing improving profit outlooks divided by the those with lower estimates – remains all important for investors. BofA Securities global quantitative strategist Nigel Tupper provided a succinct but useful update,

“The monthly Global Earnings Revision Ratio improved in June from 0.26 to 0.50..By region, the Ratio is now highest in the US, and by sector, the Ratio is highest for defensive sectors and Semiconductors… The one-month Ratio improved in all global sectors in June. The Ratio is now lowest for Banks (0.27), Consumer Discretionary (0.39), Energy (0.41), and Industrials (0.41). The Ratio is highest for Health Care (0.79) Semiconductors (0.83), and Utilities (0.84). By style the Ratio is highest for Momentum (0.85) and lowest for Value (0.30).”

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Not to be outdone by BofA’s widely read monthly fund manager survey, Citi strategist Tobias Levkovich has conducted a survey of his own, with some surprising results (my emphasis),

“75% of asset managers see bottom-up consensus 2021 EPS forecasts of $164 as too high and nearly 70% perceive a 20% correction being more likely than a further 20% advance , reversing the percentages of late March, when bullishness was evident… Median cash of 10% is more than 2x average levels … Favorite sectors for 2020 outperformance include Tech, Health Care and Communication Services, while Energy, REITs and Financials are the most unloved… Dividend-oriented stocks were unloved which was another shift from March (captured in Figure 18). And one can easily determine from Figure 19, that the current S&P 500 dividend yield is well above those of long-dated Treasuries yet it does not seem to matter.”

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Diversion: “The Best TV Shows of 2020 (So Far)' – The Ringer

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