Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
There is a certain type of finance writing that venture capitalist and finance author Morgan Housel does best and Money Rules is a good example. Barry Ritholtz, New York-based founder of Ritholtz Wealth Management, petitioned social media for everyone’s top ten rules about dealing with money and unsurprisingly, Mr. Housel’s was among the best. Here are some highlights,
“Getting rich and staying rich are different things that require different skills… The formula for how to do well with money is simple. The behaviors you battle while implementing that formula are hard… Spending money to show people how much money you have is the fastest way to have less money… Money makes it easy to mistake optimism (good) with gullibility (dangerous) and overconfidence (disastrous).”
More detail on each of the rules can be found on Mr. Housel’s Collaborative Fund site which I recommend perusing.
“Money Rules” – Housel, Collaborative Fund
It’s been a trend for prominent strategists to predict minimal short-term gains for equities until year end or for the next 12 months. Citi global equity strategist Robert Buckland provided the latest evidence Monday,
“We target a 2% increase in the MSCI AC [All Country World Index] to Mid-2022. Positive earnings revisions should support global equities in 2H21, but next year may prove tougher as EPS momentum fades and monetary tightening looms. Our global Bear Market Checklist (8/18 red flags) still wants to buy the dips. Upgrade momentum means we stay Overweight US equities despite rich valuations. The UK is our preferred value trade. We are Underweight EM and Australia. Economic recovery means we favour traditional cyclical sectors, along with IT. We are underweight defensives… The MSCI AC World benchmark currently trades on 19x 12m fwd EPS, well above the 15x long run median. The U.S. looks most expensive on 22x. The UK looks cheapest on 13x. Valuations are vulnerable to monetary tightening… Citi market targets imply mild gains for the MSCI AC World benchmark to mid-22. Strong EPS momentum should provide further support for global equities in 2H21, but monetary tightening will loom larger into 2022”
“@SBarlow_ROB Citi’s Buckland the latest to predict minimal equity gains in short term” – (research excerpt) Twitter
Copper miners and the commodity price have benefited both from a recovering global economy and the trend towards de-carbonization that requires the metal for batteries among other uses. U.K. Morgan Stanley analyst Susan Bates believes that recent weakness in copper markets will be around for a while, however, thanks to a slowing Chinese economy,
“A well-stocked China means a copper demand rebound is unlikely before Q4 – when there will be more supply, too … will China need to restock copper in 2H21? We doubt it. Based on apparent consumption of copper vs estimated content of copper in semi-fabricated goods, we estimate that China built around 1.3Mt of copper inventory (including exchange, bonded, state reserves, and other) in 2020. The drawdown began in late March, and as imports have contracted (-6%ytd), we estimate that China has used around 175kt (13%) of that excess copper… the semiconductor shortfall has weighed on automotive and electronics demand, while high prices threaten to slow construction and manufacturing activity… we see the copper market underpinned by still low inventory levels (2.8 weeks’ consumption), with macro and sentiment key price drivers in the absence of a strong fundamental catalyst. MS [forecasts] $9,094/t 2H21.”
“@SBarlow_ROB MS: “Copper cools”' – (research excerpt) Twitter
Newsletter: “Three dominant investment trends for the rest of 2021” – Globe Investor
Diversion: Many of these are absolutely incredible. “50 Incredibly Powerful Photos of the Natural World” - Jack Shepherd/Medium
Tweet of the Day: “@SoberLook The correlation between US disposable income and consumer spending has broken down” – Twitter
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