Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Morgan Stanley chief economist Chetan Ahya published a report Monday outlining the five reasons investors must prepare for inflation pressure,
“Private sector risk appetite has experienced limited scarring: As we have argued at length, the pandemic was an exogenous shock. Policy-makers were unfettered by moral hazard concerns and had little hesitation about underwriting household and corporate income losses to an unprecedented degree. In particular, while unemployment cost US households US$330 billion in wage income, they have already received US$1 trillion in aggregate in transfers … the loss from unemployment overstates the economic loss … our unemployment rate forecasts are more bullish than the consensus. As things stand, about 78% of US job losses have come in COVID-19- sensitive sectors, which will rebound rapidly … Third, policy-makers are attempting to run the economy red-hot, with the aim of returning the economy to its pre-COVID-19 unemployment rate … Fourth, policy-makers are pushing for further transfers to low-income segments, and they are likely to continue reining in the trio of tech, trade and titans in an effort to mitigate the impacts of a lower wage share and higher income inequality. The recession’s disproportionate impact on lower-income households has exacerbated the pre-existing issue of inequality, increasing the impetus for policy-makers to act.”
The majority of current investors have no experience with inflationary environments, which hit retirees and dividend investors disproportionately hard.
“@SBarlow_ROB From MS’s “Five Reasons Why We Are Inflation Bulls”” – (research excerpt) Twitter
BofA Securities analyst Benjamin Heelan sees significant upside for offshore wind-related stocks despite the big 2020 rally,
“2020 was an extraordinary year, with Vestas, Siemens Gamesa & Nordex posting 80-115% returns. Top down, a growing recognition of the exceptional outlook for offshore, and the ‘green agenda’ at the forefront of COVID recovery stimulus were supportive. Bottom up, strategic actions by the companies supported mid-term earnings outlook despite short term COVID pressure (SGRE acquiring Senvion IP, Vestas acquiring 100% of Vestas MHI offshore, Nordex rights issue to accelerate growth). 2021 promises to be another strong year, with up 25-30GW of offshore capacity expected to be awarded in the coming 12-18 months, as well as onshore set for a ‘repowering boost’. We raise our PO on Vestas to 1630DKK, and raise SGRE to Buy, PO €45, and Nordex to Buy, PO €32… Our colleagues indicate forecasts suggest that renewables capacity additions need to increase 3-4x over the next three decades to meet Paris Agreement targets … we can see all three offshore players (SGRE, Vestas and GE) seeing significant offshore growth medium term.”
“@SBarlow_ROB BoA is bullish on offshore wind” – (research excerpt) Twitter
Scotiabank analyst Orest Wowkodaw sees the possibility of a new commodity supercycle,
“Remarkable post-pandemic demand recovery in China rescued commodity markets from complete disaster in 2020. Although significant risks remain, our “base case” continues to anticipate a strong stimulus-driven recovery in ex-China markets in 2021-2022. In the medium to long term, we anticipate the emergence of a new commodities super cycle driven by growing demand from global decarbonization efforts to address climate change amplified by the impact of severe underinvestment in new production capacity by the supply side … We strongly prefer Cu [copper] exposure among the base metals. We forecast the Cu market to post a meaningful 2021 deficit driven by demand recovery before transitioning to a large medium-term structural deficit due to supply erosion. Moreover, we anticipate Cu to be among the biggest beneficiaries of growing global decarbonization efforts. We forecast near-term over-supply in both Zn [zinc] snd Ni [nickel] markets”
“@SBarlow_ROB BNS: “we anticipate the emergence of a new commodities super cycle driven by growing demand from global decarbonization”” – (research excerpt) Twitter
“Monday’s analyst upgrades and downgrades” - Globe Investor
Diversion: “What Would It Take to Run a City on 100 Percent Clean Energy?” – Wired
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