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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

We’ve now entered the fourth quarter of 2019, and the bearishness on earnings and stock valuations for next year is piling up. UBS U.S. equity strategist Francois published a report Monday arguing that lower interest rates are not going to save equity markets this time,

“There is growing evidence that equities are entering the Risk-Aversion phase of the cycle: The ISM dipped below 50 in August while the forward EBIT growth rate for the S&P 500 closes in on 0%. Meanwhile, September notwithstanding, defensives began to outpace growth this summer, a consistent sign of Risk-Aversion in the past. Fed rate cuts are not likely to fuel equities higher as they did in the 1990s: The Fed-easing rallies of the 1990s were made possible by a strong inverse correlation between interest rates and P/Es. This relationship no longer exists today.’

“@SBarlow_ROB UBS's Trahan is ... not optimistic” – (research excerpt) Twitter

See also (chart from Citi credit strategist Matt King): “@SBarlow_ROB C: Lower rates = more cash hoarding” – (research excerpt) Twitter

“When risky zero-sum behaviours prop-up growth” – FT Alphaville (free to read with registration)

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Morgan Stanley’s Michael Wilson is even more explicit on U.S. profit growth,

“The S&P 500 has delivered subpar returns over the past 12 months (~4%) with increasing volatility, and returns have come from a narrower group - defensives, high quality, & secular growth - while cyclical or low quality stocks have lagged… Next 12 month earnings estimates have continued to rise as 2020 numbers have not been marked to realistic levels despite falling 2019 numbers. We expect numbers to start falling materially as analysts focus on 2020 and companies lower the bar. This dynamic plays out in most years, but we expect larger than normal markdowns, as we saw last year”

Mr. Wilson expects defensives sectors, like utilities and consumer staples, to take clear market leadership over high valuation growth stocks. That’s what I’ll be watching to assess whether his conclusions are right or not.

“@SBarlow_ROB MS: "We expect [EPS estimates] numbers to start falling materially as analysts focus on 2020 and companies lower the bar " – (research excerpt) Twitter

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I haven’t invested yet, but I’m still interested in eSports as an investment theme (whether I like some of the social and health implications or not).

The CEO of game publisher Activision-Blizzard, Bobby Kotick, gave an interview to CNBC Monday during which he said that eSports will eventually generate as much revenue as the major U.S. sports like baseball and basketball,

“Activision Blizzard CEO Bobby Kotick talks esports, gaming industry” – (video) CNBC

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Tweet of the day:

Diversion: “Eat as much red meat as you want - new research sets up nutrition expert civil war” – New York Times

Newsletter: Deficits are inevitable no matter who wins the federal election this month, but that doesn’t mean some spending plans aren’t better than others – Globe Investor

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