Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities hosted a global mining conference and chose three “killer charts” from management presentations.
BHP Billiton Ltd. presented a forecast of metals demand relative to the 30-year historical average. The big winners are nickel, potash and uranium. Oil and metallurgical coal are expected to lag.
Cameco Corp., somewhat self-interestedly, noted a tightening in uranium markets that should support the commodity price.
For rare earth fans, the conference u8ncovered that Lynas Rare Earths ltd. is the only non-Chinese company with significant reserves.
RB Advisors, founded by former Merrill Lynch U.S. quantitative strategist Richard Bernstein, published an interesting report noting that momentum investors would soon be piling into energy stocks,
“The global economy is changing, yet many investors seem to have static portfolios. The ongoing popularity of the so-called “secular growers” despite the stocks’ meaningful underperformance as the economy has started to change indicates investors generally have not understood the powerful secular macroeconomic forces fueling those stocks. Whereas most investors have focused on companies’ supposed unique business models, the reality is macro trends were the predominant catalyst for longer-term outperformance … investors seem to downplay the ongoing change in leadership as simply a short-lived value cycle in hopes the old leadership returns. History shows changes in market leadership tend to last longer than investors expect and if the recent cyclical/value/small cap leadership does indeed last, momentum investors could be buying energy, materials, and other value/cyclical investments in a year or so.”
There are a lot of global momentum-focused funds that were previously overweight FAANG stocks and tech. If they do move to stocks, this would provide a significant boost to stock prices in the sector
“@SBarlow_ROB RB Advisors, “History shows changes in market leadership tend to last longer than investors expect and if the recent cyclical/value/small cap leadership does indeed last, momentum investors could be buying energy, materials, and other value/cyclical investments in a year or so.” " – (research excerpt) Twitter
Morgan Stanley’s U.K.-based strategist Andrew Sheets provided an overview of how the next decade will be much different that the previous ten years for investors,
“The post-GFC period was defined by fiscal austerity, low investment, a deleveraging consumer and central banks acting pre-emptively to choke off inflationary risk … Our expectations this time around couldn’t be more different. Fiscal policy is historically expansionary. The consumer in the US, Europe and China is in outstanding shape, with record levels of savings. We see a ‘red-hot capex cycle’ and public and private sector investment increasing. Global real rates are still near all-time lows… In short, it’s a global economy with a lot of gas and few brakes: And if that is so, it means the risk case is different. After a decade where risk often skewed to the downside and the question was what new form of easing would central banks conjure up to fight weakness, the issue now is that growth is good. Hence, will the recovery create inflation? Will it alter central bank policy? Will that lead to margin and tax pressures? And is good growth already in the price?”
“@SBarlow_ROB MS: ‘it’s a global economy with a lot of gas and few brakes:” – (research excerpt) Twitter
Diversion: “A blind man can perceive objects after a gene from algae was added to his eye” – M.I.T. Technology Review
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