A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
BMO chief economist Doug Porter discussed the market issue that dwarfs all others as 2020 approaches – will the global economy rebound or not?
Mr. Porter discussed the bull and bear cases,
“If growth does indeed revive, monetary policy will stop easing, and could even shift gears at some point, yields would mount a comeback, and earnings would find serious support. If, however, growth flags further, we could see renewed policy easing, a deeper dive in yields, and some serious downward pressure on earnings … Buoyant equity markets certainly seem to suggest that growth is poised to revive … Beyond just the signalling effect of record equity market highs, there is also a wealth effect that could flow from the rapid rise in asset prices … [But] Even with the powerful comeback in financial markets, the broader leading indicators continue to point to weaker growth, not a comeback. And that goes for either the U.S. indicators or the broader OECD figures. Consumer confidence and business sentiment are sagging.”
“@SBarlow_ROB BMO: "The Great [market] Debate for 2020" – (research excerpt) Twitter
“Global manufacturing is looking a little brighter heading into the end of the year” – Bloomberg
“South Korea’s exports extended their slump to a 12th month, as uncertainties over the trade war linger and a recovery in tech demand is yet to be seen” – Bloomberg
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Like China’s debt issues, underfunded pensions arising from central bank-driven low bond yields just sits on the financial horizon as a looming catastrophe that never seems to get closer,
“More than a decade of ultra-loose monetary policy has damaged the prospects of a safe retirement for millions and is sowing the seeds of the next financial crisis, according to new research … ‘As a crisis-era measure, QE has worked,’ said Amin Rajan, chief executive of Create Research. ‘But its unintended side effects have undermined its overall effectiveness.’ … persistently low interest rates have caused problems for pension funds hunting for returns, forcing them to move into riskier areas such as illiquid assets and grapple with rising debt levels and asset prices.”
“Pension funds warn over QE damage” – Financial Times (paywall)
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Brookfield Asset Management CEO Bruce Flatt noted that the company is more cautious on asset markets now than in 2009 in a BNN Bloomberg interview,
“While he doesn’t think it will happen ‘tomorrow morning,’ the CEO of Brookfield Asset Management Inc. said it’s inevitable there will be a recession in developed markets ‘at some point in time,’ adding that some countries, particularly in Europe, are already headed there. ‘We are close to 11 years in this economic cycle. I don’t think economic cycles have been repealed,’ … ‘There will be disruption in credit markets, in stock markets. Our view is when you’re in an environment that is more robust than what you might otherwise have in an average environment, you should just be careful. So we have more dry powder in funds, more cash on our balance sheets,’ Flatt said."
“Brookfield more cautious now than in 2009 as 'disruption' looms: CEO” – BNN Bloomberg
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Citi U.S. equity strategist Tobias Levkovich sees upside for markets in the first half of next year but risks for the second half,
“Our biggest concerns for the S&P 500 are more 2H20 related, tied to the possibility of a business slowdown caused by management teams hunkering down prior to the elections, tighter C&I lending standards in October with a traditional nine-month lag, our margin lead indicator and the impact of the yield curve’s shape on volatility with a two-year lag. This may mean that we are less thankful this time next year, but in the interim there is still upside for equities even if such gains become more limited. Our value bias remains”
“@SBarlow_ROB Levkovich believes risks for 2020 back-end loaded” – (research excerpt) Twitter
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Diversion: “Brushing teeth 3+ times a day associated with material decline in cardiovascular risk” – European Society of Cardiology
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