Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
China announced an easing of monetary policy and this is big news for Canadian investors. Yesterday, I excerpted BofA Securities research blaming the recent weakness in commodity prices like copper squarely on China’s efforts to reign in lending. Re-opening the spigots should help mining stocks in the days ahead,
“China signals easier monetary policy, reviving worries about weaker growth” – CNBC
" @Callum_Thomas PBOC cuts RRR [reserve requirement ratio for banks] by -50bps” – Twitter
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Wells Fargo U.S. equity sector analyst Brian Postol published a list of stocks he believes represents ‘dynamic growth’,
“The Dynamic Growth Equity List focuses on companies we believe offer above average growth potential and may be on track to become leaders in the markets they serve. Our objective is to offer a list of stocks that they can use to help build a well-diversified portfolio or to fill holes in an existing portfolio.”
The stocks include mid and small caps which are not suited to all investor risk profiles. The full list is Electronic Arts Inc., Facebook Inc., Roku Inc., Amazon.com Inc., Burlington Stores Inc., CarMax Inc., Chewy Inc., NIKE Inc., O’Reilly Automotive Inc., Planet Fitness Inc., Tesla Inc., Wayfair Inc., Estee Lauder Companies Inc., First Republic Bank, Intercontinental Exchange Inc., and SVB Financial Group.
“@SBarlow_ROB Wells Fargo ‘Dynamic Growth’ U.S. stock picks” [NTM = next 12 months] – Twitter
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Morgan Stanley’s chief U.S. equity strategist believes the market is transitioning from early cycle to mid-cycle. This has important ramifications for sector positioning as higher quality stocks tend to outperform, taking leadership position from the most economically sensitive sectors. Significant market corrections are also common during this shift and Mr. Wilson seems to expect one soon,
“The market is solidly mid-cycle and with that typically comes a 10-15% index level correction. We expect such a correction will create buying opportunities given a still strong growth backdrop. Our economic growth forecasts remain positive, but bigger bulls continue to talk about “pent up demand”. We agree there is pent up demand for services consumption. We also think the degree of overconsumption in goods and the ensuing payback is under-appreciated as the positive effects on income from stimulus checks and the surge in asset prices fade. Wage pressures to-date have been acute but relatively narrow. Our leading indicators point to labor market tightness in an increasing number of industries, raising the prospect of further wage increases and broadening out of wage pressures.”
“@SBarlow_ROB MS: “The market is solidly mid-cycle and with that typically comes a 10-15% index level correction. We expect such a correction will create buying opportunities” – (research excerpt) Twitter
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BMO economist Robert Kavcic, whose work I’ve been using a lot lately (but not by design) is on the same page as Mr. Wilson with Two Equity Market Rotations, One Theme,
“The rally in longer-term Treasuries is casting some light on potential medium-term growth concerns. At the same time, the equity market is rotating away from what was working during the re-opening phase (or at least the period in which the market was pricing in re-opening). 1) Big technology stocks (i.e., the Nasdaq) have been quietly outperforming financials since the spring, after the latter led through the second half of 2020. 2) Similarly, big caps have been outperforming small caps since late-May. The former has helped keep the S&P 500 pushing new highs, while the latter has done nothing over the past three months. The takeaway here might be that the market is eying a slowing growth environment after the 2021H2 run (which should be priced in already); and/or accounting for virus-variant issues.”
“Two Equity Market Rotations, One Theme” – (research excerpt) Twitter
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Diversion: " This Crowdsourced Ransomware Payment Tracker Shows How Much Cybercriminals Have Heisted” – Gizmodo
Tweet of the Day: " @HelenCRobertson Oil is headed for its biggest weekly loss since May” – (chart) Twitter
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Scott Barlow