Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities quantitative strategist Nigel Tupper combines worldwide data including consumer and industrial confidence, capacity utilization, employment, credit spreads and earnings revisions into an indicator he calls the Global Wave.
Mr. Tupper now calculates that the global economy has bottomed and that investors are not positioned to fully benefit from the upcoming resurgence,
“The Global Wave has signaled a trough in the global cycle, suggesting investors should position for a sustained upturn… a globally-synchronized earnings upturn has the potential to drive cyclical rotation. Following a Global Wave trough signal, the best performing styles are usually Value, Cyclical Growth, Risk, Momentum and Small Size … the recent re-rating of equities does not detract from the current trough signal which supports earnings, equities, and cyclicals.”
The strategist included a list of stocks set to benefit, including three Canadian companies- Lundin Mining Corp., Teck Resources Ltd. and Blackberry Ltd. Other prominent names on the list are Peugeot, the U.K.'s Evraz, and American firms Cheniere Energy Inc., Diamondback Energy Inc., Pioneer Resources Co., Serepta Therapeutical Inc. and XPO Logistics Inc.
"@SBarlow_ROB BoA: Top picks to benefit from bottoming and recovery in global economy' – (table) Twitter
Credit Suisse chief investment officer for the Americas James Sweeney sees a heightened risk of a significant market correction in the short term,
“Monetary policy will stay extremely loose for longer … Therefore, the IC [investment committee] maintains its view that over a medium-term horizon of about six months, equities should perform well. However, more near term, the IC sees tactical risk factors that suggest refraining from increasing risk in portfolios at the moment. Last week’s correction in equities was a warning that a more pronounced consolidation could be in the offing after equity valuations became lofty over the past few months, with the US market in particular becoming increasingly lopsided as the rally was more and more concentrated in certain technology names. Despite believing that the digitalization of economies is an important longer-term trend, near term, the IC sees a risk of further consolidation in the sector… In the US, we are approaching what is likely to be a highly contested US presidential election. In the run-up to it, tensions with China could escalate. On the economic front, we expect a significant deceleration in growth starting this month, as the surge related to the reopening of economies is fading and as household incomes are deteriorating after fiscal support measures in the US ran out in late July.”
"@SBarlow_ROB Credit Suisse sees higher risk of correction in short term' – (research excerpt) Twitter
"@SBarlow_ROB “systemic consequences [of a tech bubble deflation” would be enormously negative" (but they don’t think that’s what this is) (JPM) – (research excerpt) Twitter
Citi U.S. equity strategist Tobias Levkovich’s conversations with institutional investors uncovered four big questions they want answered,
“While the Street believes a Biden win is the most probable outcome, there are few indicating concern about potentially higher corporate taxes as they envision more stable trade policy as an offset. … we do not see the impetus to actually to get to a [U.S. fiscal stimulus] deal before November 3rd as the HEROES Act passed by the House and the so-called “skinny” deal being proffered by the Senate become talking points to convince voters by painting opponents as not acting in good faith … Disappointments on timing [for a COVID-19 vaccine] could become common but our sense that 1Q21 is the appropriate time frame for availability and distribution with maybe a 2Q21 rebound as a greater number of people get vaccinated… Will money flow into stocks? Mutual funds and ETFs have not been kind to US equities for the past five years and buybacks have been curtailed sharply. Thus, one wonders after hedge funds lever up and short interest is covered, who are the new buyers?”
Diversion: “What’s Wrong with Social Science and How to Fix It: Reflections After Reading 2578 Papers” – Fantastic Anachronism
Tweet of the Day:
Citi Panic/Euphoria still high. pic.twitter.com/fWj83E4quG— Helene Meisler (@hmeisler) September 12, 2020
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