Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Unlike some high profile research houses – Morgan Stanley in particular – Citi strategists remain steadfastly bearish in the United States and abroad.
In a Tuesday research report, U.S. equity strategist Tobias Levkovich warned of a “reckoning” ahead for the S&P 500 (my emphasis),
“We suspect that a bit of FOMO (Fear of Missing Out) entered the fray as FOMU (Fear of Meaningfully Underperforming) weighs on portfolio managers that did not get out of the way earlier on. While the health care news of late has been encouraging, it is difficult to say that we are out of the woods yet… we are a bit surprised that investors have jumped in so quickly with earnings problems on the come.
"As we have pointed out several times, the EPS estimates on the Street are still too high, and a reckoning is likely. Even optimistic outlooks indicate a late-year return to somewhat normal life with legitimate worry about a second wave of infections in the autumn as weather cools, not to mention uncertainties around the November presidential elections and the impact of credit disruption on business activity.”
“@SBarlow_ROB “EPS estimates are still too high, and a reckoning is likely” – (research excerpt) Twitter
See also: “ @SBarlow_ROB C: "We Have Turned Negative on Price Momentum and Earnings Revision "” – (Citi research excerpt) Twitter
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A 55-page report published by CIBC analyst Dean Wilkinson Tuesday provided useful insights into the domestic REIT sector (my emphasis),
“We believe that the pace of the COVID-19 recovery will be the single most important factor driving the eventual path of REIT returns through the rest of the year. .. we do not believe that valuation can be used as an indicator for potential price floors at this time … current pricing provides appealing entry points for many of the REITs within our coverage universe for those investors with very long-term time horizons … Residential and Industrial REITs are likely to see the least impact to FFO in an optimistic and base scenario … we would expect more upside torque from Retail and Seniors REITs should COVID-19 concerns dissipate quickly. ... We favour those REITs that carry relatively lower valuation risk, above-average yield, and strong balance sheets, including BPY, REI, SRU, GRT, and HR, and small(er) caps including APR, KMP, WIR, and HOM”
“ @SBarlow_ROB CIBC: Top picks in the Cdn REIT sector” – (research excerpt) Twitter
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I’m still a big fan of Nomura’s Tokyo-based quantitative strategist Masanari Takada, who follows fund flows for the world’s most speculative portfolios in search of indications for short-term market performance.
Mr. Takada echoed Mr. Levkovich’s concerns about markets in a Wednesday research report,
“Global equity markets remain jittery despite making a stab at a rally. Our overall view of the situation is that the stock market rebound across major world markets is being led by exits from bearish trades, including a squeeze on short positions held by systematic traders. Most investors (apart from some with short investment horizons) are still in standby mode, and some may be inclined to sell whatever rallies come along. The pick-up in investor sentiment looks like no more than the sort of spontaneous rebound in sentiment that one would normally expect under the circumstances. We think the present rally should best be viewed as an unenthusiastic, inorganic bear market rally.
“@SBarlow_ROB Nomura's Takada: "We think the present rally should best be viewed as an unenthusiastic, inorganic bear market rally" – (research excerpt) Twitter
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Diversion: “John Prine Always Saw the Best in Us” – The Ringer
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Scott Barlow