A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Good news, Canada is no longer last on list of the least attractive global equity markets according to Citi strategist Chris Montagu’s ranking of the 22 equity markets where ETFs are available.
The model is valuation focused, emphasizing basic earnings and operating earnings, profitability, dividend yield , book value and revenue growth.
The TSX was among the bottom five but has escaped, barely, and is now sixth worst.
“@SBarlow_ROB Canadian equity market leaps to sixth worst in the world (Citi). Universe is 22 markets where credible ETFs are available’ – (chart) Twitter
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The Financial Times’ David Sheppard provided some helpful analysis on how U.S. shale production has changed global energy markets.
Mr. Sheppard notes that crude trading has been largely unaffected by the mass contamination of Russian supply, an event that would have resulted in panicked trading activity a decade ago,
“With new pipelines connecting key production basins to export hubs on the Gulf Coast set to open later this year, some traders are arguing the market is better equipped to deal with supply disruptions than before. The $100-a-barrel oil era remains a distant memory, as the long-term outlook for supplies has flipped from scarcity to plenty… Many are concluding that, frankly, if the threat to Russian supplies combined with the aforementioned problems in Venezuela, Iran and Libya cannot make oil prices spike, then what could? … “Right now the market is jumpy, so outages like Druzhba feed into this bullishness,” [Derek Brower, a director of RS Energy Group] said. “But the bigger question is when the longer-term fundamentals overwhelm the short-term worries.”
“US shale boom has blunted impact of global oil threats” – Financial Times (paywall)
“Oil prices weighed down by record U.S. output, inventories’ – Report on Business
“ Suncor beats Q1 profit estimates on higher prices, volumes” – BNN Bloomberg
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Credit Suisse sees the loonie as largely range-bound for the near future, expecting it won’t rise much, but also won’t fall below
“Markets have priced in possible BoC rate cuts in the same way they did for the Fed, but with marginally less aggression. We suspect the BoC’s shift to a clearer dovish bias is designed to encourage this correlated behavior … a sustained break [below US$ 0.735] is unlikely in absence of broader risk off, as higher oil prices offset the predictably dovish BoC language”
“@SBarlow_ROB CS: Loonie will be rangebound’ – (research excerpt) Twitter
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Morgan Stanley’s U.K. –based cross asset strategist Andrew Sheets believes a rally in Asian stocks driven by a Chinese economy recovery is more likely than a melt-up rally in the S&P 500,
“melting up is hard to do: Define a 'melt-up' as a historically large move from a high starting point, and they account for just 1-2% of historical observations. Similar to today, they usually occur with the Fed on hold and yields declining. Unlike today, they usually start after modest returns and occur with stronger underlying earnings growth and greater levels of investor fear/negativity. the market was overpricing a benign 'Goldilocks' environment, and underpricing both tails. But we are sceptical about a US melt-up for two specific reasons: i) Our economists don't see the Fed making an 'insurance' rate cut; and ii) We are below consensus on 2019 earnings growth. While bullish investors are looking to the US, we instead think that the more likely 'bull case' lies overseas, if better growth in China pulls up other regions.”
“@SBarlow_ROB MS: Asia rally more likely than u.s. melt-up’ – (research excerpt) Twitter
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Tweet of the Day:
Diversion: “It might be the most important invention in human history. This is how humanity harnessed thin air to feed billions.” – Bloomberg
Newsletter: “The painful reality is that investor education does not work” – Globe Investor
Scott Barlow