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

BMO chief economist Doug Porter attempted to interpret conflicting signals from the domestic housing market,

“The most surprising aspect of the latest batch of Canadian housing data was the deep drop in new listings. They fell 7.9% m/m in February and are now at the lowest level (in seasonally adjusted terms) since 2004, aside from the depths of 2020. In turn, this has actually tightened the market, even though sales have plunged 40% y/y. The sales-to-new listings ratio has been quietly climbing since bottoming out last fall. This ratio tends to lead prices by about 4-5 months, and suggests that things could soon stabilize. An optimist could even say the chart suggests prices may soon hook higher. The BoC’s pause, and the latest mega rally in bonds, may also provide some support. The offset is that the financial turmoil could spill into weaker economic activity. And also there is the small matter that the big drop in listings suggests that activity in general is at a standstill, amid the fall in prices over the past year and the cloud of uncertainty around the market overall.”

“BMO: “Home Prices: So, You’re Telling Me There’s a Chance?”” – (research excerpt) Twitter


RBC Capital Markets global energy strategist Michael Tran addressed weakness in the oil price,

“It is well understood that the risk off tone has roiled global markets, but major crude benchmarks (WTI: -8.3% past two sessions) have underperformed many other corners of the market such as the SPX (+0.94%) and even crypto with Bitcoin (+1.8%). Fundamentally speaking, there is more noise than news in the oil market this week, but is crude suffering a crisis of confidence or is the barrel being thrown out with the bathwater? … Fundamentals have been soft, but WTI retracing to the mid $60/bbl level is what our models peg as fair value for a meaningful, 2008-like recession. Headlines of the past week draw eerie parallels to the early days of the Great Financial Crisis, but the latest market retracement feels overdone, unless a 2008-style contagion runs uncontained … Long dated, deep out of the money calls have been bid as an inexpensive way to express a bullish view. The $100, $115 and $150/bbl call strikes are seeing the greatest amount of open interest.”


Morgan Stanley chief economist Ellen Zentner is concerned that financial stress will translate into U.S. unemployment,

“Tighter lending standards will slow growth and hiring. Weekly lending and labor market data will be the first to show signs of stress, but we’re not likely to see the full effects for several weeks. Our bank analysts see a meaningful increase in funding costs ahead, which will lead to tighter lending standards, slower loan growth, and wider loan spreads. We were already expecting a meaningful slowdown in growth and job gains over the coming months, and the prospect of substantial tightening in credit conditions raises the risk that a soft landing turns into a harder one. Tighter lending standards dent job creation. Our models show that a permanent +10pt tightening in lending standards for C&I [commercial and industrial] loans leads to a 35bp rise in the unemployment rate over the next two years … For the upcoming FOMC meeting, we still see the Fed following through with a 25bp hike in response to persistent inflationary pressures and a very strong labor market”

“MS: Financial upheaval = higher unemployment” – (research excerpt) Twitter


Diversion: “Notre-Dame Repair Reveals Another Historic First: 800-Year-Old Iron Reinforcements” – Gizmodo

Tweet of the Day: “The last time we saw this amount of implied volatility in US Treasury yields was in December 2008″ – Twitter