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

BMO senior economist Robert Kavcic notes the remarkable consolidation in North American equity indexes,

“The S&P 500 is essentially unchanged from levels seen in late-2017, marking about a 2½-year period of consolidation (despite some wild swings in between). At the same time, forward-year earnings expectations have risen by about 16%, so valuations have gradually come down … Meantime, the TSX is currently unchanged from levels seen in 2008, making it more than a lost decade for the Canadian index. That said, chunky dividends have kept 10-year total returns above 5%, which is not bad at all considering.”

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“@SBarlow_ROB BMO: "Meantime, the TSX is currently unchanged from levels seen in 2008" – (research excerpt) Twitter

***

BofA Securities U.S. quantitative analyst Savita Subramanian remains concerned about U.S. profit growth and a slow recovery for services sectors and consumption, but (my emphasis) …

“The market is telling us not to worry. And it is dangerous to ignore the market … Our Sell Side Indicator, a gauge of Wall Street sentiment, remains our most bullish market timing model of the five we use, and signals 12 month total returns of 14%. Our Global Investment Strategists point out that self-reported cash levels in funds are very elevated … Since 2010, bond inflows have been >3x equity inflows … With the Fed spending close to 40% of GDP and fiscal stimulus adding another 35% to plug the 2020 COVID-19 hole, and with multinationals re-shoring and re-investing in the US, we could get a big economic pickup next year … But stocks’ elevated valuations on a variety of other self-comparable measures suggests lower long term returns from here … But on free cash flow, the S&P 500 is still inexpensive, and mean reversion to its long-term avg would put the S&P 500 at 3400.”

“@SBarlow_ROB BoA: "But on free cash flow, the S&P 500 is still inexpensive, and mean reversion to its long-term avg would put the S&P 500 at 3400"” – (research excerpt) Twitter

***

A chilling warning from Canadian Federation of Independent Business (CFIB) Executive Vice-President Laura Jones,

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“Half of Canadian small business owners say they won’t make next month’s rent payment without additional help, according to a Canadian Federation of Independent Business (CFIB) survey published Wednesday. Fifty-five per cent of respondents to the survey conducted over the weekend said their very survival depends on more rent relief, with that response being as high as 80 per cent in the arts and recreation sector. ​"The closer we get to June 1, the more stressful things are getting and the more business failures we will see," said CFIB Executive Vice-President Laura Jones in a release. “We're begging governments to move quickly to create additional help outside of CECRA [​Canada Emergency Commercial Rent Assistance]”

“50% of small businesses can't make June rent without more aid: CFIB” – BNN Bloomberg

***

Newsletter/Print Column: “ Value stocks make a comeback” – Barlow, Inside the Market

Diversion: “10 Sci-Fi Action Movies to Watch if You Miss Thrill Rides” – Gizmodo

Tweet of the Day:

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