A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Markets are set to head sharply lower at the open Tuesday. We can’t blame U.S. bond yields either - they’ve been flat to lower in recent sessions. Concerns about global economic growth and fading profits as U.S. fiscal stimulus fades are the likely culprits,
“Dow is set for 400-point loss after 3M, Caterpillar earnings disappoint” – CNBC
“Biting bears sink world shares to 1-year low” – Reuters
“Higher Highs and Lower Lows” – Batnick, Irrelevant Investor
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Merrill Lynch equity and quantitative strategist Savita Subramanian implements a 19-point bear market checklist to predict when the post-crisis equity market rally will end. Currently, 14 of the 19 boxes have been checked (full list here) which historically has meant the rally has just over 20 months to go,
“Two more “bear market signposts” (VIX and consumer confidence) were triggered in early Oct., while another signpost (market returns) reversed to positive, bringing the tally to 14 of 19, or 74%, of signposts triggered. But in the past, 74% or so triggered happened 21 months ahead of the market peak (since 1968). Prior cycles always saw a higher percentage (often 100%) of signposts triggered ahead of the ultimate peak.”
“@SBarlow_ROB ML: 14 of 19 boxes checked on bear market checklist” – (research excerpt) Twitter
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Copper and oil prices have been heading in different directions which on the surface seems odd because both are driven generally by global economic growth. Goldman Sachs has a theory to explain the rare divergence,
“What could explain the disappearance of the positive correlation between the net speculative positioning in oil and that in copper in recent years? We think that the biggest factor is that oil is a DM centric commodity while metals are tightly linked to the investment cycle in EMs. While DM and EM cycles were highly correlated pre-crises more recently they have been getting increasingly disconnected. With DMs being more late cycle demand level for oil is currently high … EMs on the other hand are still early cycle implying that metals demand is still depressed”
“@SBarlow_ROB GS on copper/oil price divergence: "We think that the biggest factor is that oil is a DM centric commodity while metals are tightly linked to the investment cycle in EMs" – (research excerpt) Twitter
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I’ve written previously about cybersecurity stocks being, for me, the trade that got away. Demand for network security seems a lock to me, but I’ve had no luck finding an entry point for an investment in the sector so far. Citi research previewed the imminent earnings reports from the sector,
“While demand is stable, we don’t see the sector as having benefitted recently from the very strong discretionary spending that is impacting other areas of software coverage (customer-facing apps, SaaS). Off-cycle PANW remains our favorite, followed by PFPT and SAIL, FSCT likely good risk/reward into Q3 — We note that in software market where growth has achieved unprecedented valuation, security valuations (in our coverage) largely remain reasonable”
“ @SBarlow_ROB C: earnings preview for cyber security” – (research excerpt) Twitter
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Tweet of the Day:
Diversion: “A tailormade drug developed in record time may save girl from fatal brain disease” – Science
Scott Barlow