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

BofA Securities investment strategist Michael Hartnett’s year-ahead forecasts were typically blunt, with the winning asset classes being bonds, bullion and market breadth,

“3Ps: bulls outperformed bears like us in 2023 but we await the classic combo of bearish Positioning, recessionary Profits & Policy easing, the 3P’s, to flip to ‘full bull’; we believe the risk of a ‘hard landing’ for the economy is higher-than-expected; a soft landing which takes bond yields from 5% to 4% is bullish risk, but a deeper recessionary decline in yields from 4% to 3% is bearish risk … 3Cs: we think 3Cs of Credit, Crude, Consumer are signalling slower growth; Credit is tightening, spreads rising, defaults rising, delinquencies rising; oil has entered an unexpected bear market; and while U.S. Consumer thus far bulletproof (job security & wealth security) unemployment is now rising … once 3Cs cause bear positioning ... We predict H2 bull markets in 3Bs of Bonds, Bullion, Breadth; a weaker U.S. economy & Fed cuts delivers cyclical decline in bond yields & US dollar (+ve gold); bonds can easily deliver equity-like returns in 2024 … Buyers of ‘hard landing’ plays at onset of recession (REITs, banks, retail, utilities, staples, small cap, China are the areas to nibble at in coming months)”

Breadth is likely the least intelligible ‘B’ predicted to outperform. In this case, it means that more stocks will drive equity index returns, not just large-cap technology.


Goldman Sachs global foreign exchange strategist Kamakshya Trivedi is optimistic on the Canadian dollar,

“CAD: An optimistic twist. October inflation looked soft this week on the BoC’s preferred measures, and while September retail sales surprised to the upside, the core details looked less firm than the headline suggested. The Bank of Canada is likely to take comfort in these numbers. Indeed, Governor Macklem’s speech on Wednesday sounded markedly more optimistic on the Bank’s progress toward cooler inflation. He noted that “the excess demand in the economy that made it too easy to raise prices is now gone” and that “the tightening of monetary policy is working, and interest rates may now be restrictive enough to get us back to price stability.” Overall, the message from the BoC seems to be one of greater confidence that it has done enough to get inflation back to target, and would prefer to wait for additional tightening to work its way through the economy rather than do “too much” to get inflation down and risk softer growth”

Goldman Sachs sees the loonie at 71 US cents (currently 73 US cents) in three months, 72 US cents in six months and 74 US cents in 12 months.


The North American consumer remains resilient but a gap between spending in the U.S. and Canada remains according to BMO chief economist Doug Porter,

“The bigger story in 2023 has been how well the North American consumer has held up in the face of serious headwinds. Even Canadian retail sales were firmer than expected in the fall, rising 0.6% in September and an initial read of +0.8% for October. Still, a few points to show that Canadian consumer activity is mostly soggy: In volume terms, sales are up a mild 1.5% y/y. Ex-autos, real retail sales are up just 0.2% y/y. These figures are all flattered by +3% population growth; in per person terms, they’re falling. The deep gap between U.S. and Canadian sales that opened up after the huge stimulus in 2021 has not closed (chart). So, from pre-pandemic days, U.S. nominal sales are up more than 36% versus a 23% rise in Canada. (U.S. prices are up 3% more over that period, accounting for a small share of the gap.)”


Diversion: “Sports Illustrated Allegedly Dupes Readers With Fake AI-Created Writers” – Gizmodo

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