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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

The Bank of Canada is broadly expected to make dovish noises today in preparation for an October interest rate cut. CIBC interest rate strategist Ian Pollick is not so sure (my emphasis),

“The real risk today is that Governor Poloz doesn't feel overly compelled to mark-to-market the negativity felt in bond markets into the statement accompanying the rate decision. After all, he will need to justify why administered rates were left unchanged… as businesses feel less inclined to invest it creates an imbalance in the market for savings - with less investable opportunities, savings (the ultimate 'source' of funds) begin to rise as a percentage of GDP and that ultimately pressures real yields lower. For a country like Canada this dynamic implicitly suggests that the equilibrium level of real interest rates is somewhat independent of domestic conditions, particularly on a secular basis. Remember, some 65.0% of moves in Canadian duration this year are estimated to have been 'imported' from other, larger, bond markets.”

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If Governor Poloz offers fewer hints of a rate cut than expected, this could cause a short-term jump in bond yields and a correction in bond proxy sectors like utilities and REITs.

“@SBarlow_ROB CM rate strategist Pollick: "65.0% of moves in Canadian duration this year are estimated to have been 'imported' from other, larger, bond markets" – (research excerpt) Twitter

“All eyes on Bank of Canada's interest rate decision, view of global economic climate” – CBC

“Loonie's recent movement could be reason for worry: CIBC Capital Markets” – BNN Bloomberg

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Citi’s research department now believes there will be no U.S. China trade resolution before the 2020 presidential election,

“Our base case has been for a sustained period of global economic stagnation with “insurance CB easing” extending this cycle and providing the support for risk assets. With rising geopolitical tensions, our bar-bell strategy of overweight selective stock markets and USTs has worked well YTD. However, Citi’s base case for the trade war now advises clients to “no longer expect a trade deal before the 2020 presidential elections.” With both the US and China applying tariffs, consumer fundamentals likely deteriorate further. Implied probabilities of a 2020 recession are now high enough to warrant caution. We shift even further to a more defensive stance within our asset allocation. We are now slightly underweight equities overall.”

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“@SBarlow_ROB C: "Citi’s base case for the trade war now advises clients to “no longer expect a trade deal before the 2020 presidential elections"” – (research excerpt) Twitter

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Merrill Lynch strategist Savita Subramanian has always been my go-to source for U.S. earnings estimates.

Ms. Subramanian published a report Tuesday predicting no further gains for the S&P 500 this year,

“Central banks+sentiment offset trade drama+earnings: these warring factors leave us neutral on the S&P 500 (2900 Y/E target). Stick with stocks>bonds for both the near- and long-term. Trade talk, political campaigning & tweets have contributed to volatility. Fundamental risks remain despite light positioning. .. Our 2019 year-end target remains 2900, but light positioning represents near-term upside risks. Furthermore, supportive central banks and negative sentiment are supportive. In August, our Sell Side Indicator - Wall St. strategists' average recommended equity allocation - fell to a two-year low (54.2 from July's 56.2), the biggest monthly decline in six years (cover chart), which is bullish. But trade tensions and policy (more below) are risks, and 2Q YoY EPS growth would have been negative for the first time since 2016 absent buybacks.”

“@SBarlow_ROB Subramanian: "2Q YoY EPS growth would have been negative for the first time since 2016 absent buybacks.'’ – (research excerpt) Twitter

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Tweet of the Day:

Diversion: “10 Myths About The Mind” – Psychology Today

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