Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO economist Robert Kavcic noted the surprising resilience in the domestic housing market,
“Canadian housing starts topped expectations, coming in at a hefty 246k annualized in July. After three months below 200k during the pandemic, there was a good amount of pent-up activity let out in July. The strength of the residential sector remains a key feature of this downturn, as it flies in the face of pretty much all past recessions. That is, home prices typically decline at least somewhat, and housing starts almost always fall significantly”
“@SBarlow_ROB The unbreakable Canadian housing market (BMO)’ – (research excerpt, chart) Twitter
Nomura quantitative strategist Masanari Takada follows trading activity for high turnover global hedge funds, including the algorithm-driven commodity trading advisors (CTAs). Mr. Takada is seeing a rotation to value stocks,
“Notably, investors are increasingly buying value (and selling growth) while at the same time selling momentum … We are seeing not only a shift in the preferences of trend-following investors in DM [developed markets] futures markets (exemplified by a shift away from NASDAQ 100 futures towards DJIA futures), but also a renewed liking for low-P/B stocks or high-beta stocks in cash equity markets … We think it should become clearer in late August whether this this reversal ends as a mere technical consolidation (lasting about a month) or whether it transforms into a genuine factor rotation driven by some story rooted in fundamentals (lasting about three months)'
“@SBarlow_ROB Nomura’s Takada: “we are seeing not only a shift in the preferences of trend-following investors in DM futures markets (exemplified by a shift away from NASDAQ 100 futures towards DJIA futures), but also a renewed liking for low-P/B stocks”' – (research excerpt) Twitter
Credit Suisse global strategist Andrew Garthwaite believes the U.S. dollar has a long way to fall,
“We have been high-conviction dollar bears since early May and expect the bear market to continue for a long time because: The much more severe deterioration in the fiscal position of the US vs that of the euro area and the Fed’s commitment to unlimited QE … The EU’s recovery fund (along with other measures) establishes the euro as a reserve currency … Real rate differentials have closed and are no longer supportive of the dollar… The Fed is not going to raise rates to protect the dollar … Historically, dollar bear markets have lasted for 9 to 10 years.”
Mr. Garthwaite is focusing on the dollar versus the euro primarily but his outlook can be viewed as bullish for the loonie. I consider this a brave call in light of potential global economic volatility.
“@SBarlow_ROB Garthwaite sees a decade of USD weakness” – (research excerpt) Twitter
CIBC interest rate strategist Ian Pollick sees the Bank of Canada faced with difficult choices,
“If the BoC maintains 30yr purchase operations at C$500.0-million, net-supply in the long-end will be turning sharply higher from current levels. In our view, if the Bank continues on its current path it will own too many bonds across the curve for the market to function properly. On the other hand, failure to maintain a ‘heavy hand’ will result in issuance indigestion [more supply than the usual buyers can easily purchase], particularly at the long-end. We don’t expect any large adjustments to the current LSAP [Bank of Canada asset buying] program until the October MPR”
“@SBarlow_ROB CIBC: “In our view, if the Bank [ of Canada] continues on its current path it will own too many bonds across the curve for the market to function properly” – (research excerpt) Twitter
Diversion: “All the Big Summer (Streaming) Blockbusters of 2020′ – i09
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