Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BoA Securities economists use their GLOBALCycle indicator to measure economic activity. The index is a composite of real-time economic indicators (weighted by GDP) from the U.S., European Union, Japan, U.K., Canada, Australia and developing economies. Currently, the index is cratering and the research team are forecasting a sluggish recovery,
“Our GLOBALcycle indicator free-fell in March and April as the global spread of COVID-19 pushed the majority of large economies into lockdowns. Within the components, [developed markets] drove the decline as the US [economic conditions] came in particularly weak… rebounded noticeably in March. As China started to reopen, headline indicators showed huge sequential growth rates. The reopening data are following a similar pattern in other economies: this will boost GLOBALcycle in the coming months. But momentum should soon fade as weak demand starts to dominate, as was the case in China in April.’
“@SBarlow_ROB BoA: "Our GLOBALcycle indicator free-fell in March and April" – (research excerpt) Twitter
One of my outlier concerns for 2020 was that, with almost every country issuing billions of debt every week, the foreign appetite for Canadian securities would dry up. This would be an uncomfortable trend in light of Canada’s large balance of payments deficit – it would drive bond yields higher while the economy remained sluggish.
Thankfully, the most recent data indicates that foreign demand is holding up, according to CIBC economists Katherine Judge and Royce Mendes,
“During the height of the Covid lockdowns in April, international securities transactions showed that foreign investors were flocking to Canadian debt securities. That resulted in a record net inflow of $49.2 billion into Canadian securities in April, leaving the year to date total at $120.0 billion, well above the same period last year…A surge in borrowing requirements from governments, as support for households and businesses ramped up, was met with high demand from foreign investors who acquired $54.0 billion in Canadian debt securities. Purchases of private corporate bonds also rose notably”
“@SBarlow_ROB CM: "foreign investors were flocking to Canadian debt securities' in April” – (research excerpt) Twitter
Wells Fargo periodically runs their Warren Buffett stock screen to predict potential acquisitions for Berkshire Hathaway. The methodology emphasizes high return on equity multiples, low debt, and low valuations in terms of price to earnings, price to book value and price to cash flow.
The stocks that made it through the screening this time are, in alphabetical order, Acuity Brands Inc., Cognizant Technology Solutions Corp., Regeneron Pharmaceuticals Inc., Biogen Inc., Capri Holdings Ltd., Infosys Ltd. ADR and Noble Midstreams Partners LP.
Uncle Warren, as he’s affectionately known on social media, owns a large stake in Wells Fargo of course, but I can’t see how that would affect the list.
“@SBarlow_ROB Wells Fargo: What would Buffett buy now?” – (table) Twitter
Column: “Why one of the most common ways to value stocks says little about the future returns of the TSX” – Barlow, Inside the Market
Diversion: “Mental Disorder in a Healthy Brain: The Goose, the Fox and Addiction” – Neuroskeptic, Discover
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