Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Capital Markets head of global commodity strategy Helima Croft provided some interesting details on the oil market and a reminder of its geopolitical importance,
“Ukraine has now struck eight refineries, which account for 27% of runs in Russia. Of these refiners, 3 have seen a significant drop in refinery throughput since being targeted … We expect these energy infrastructure attacks to continue as Kyiv aims to halt Moscow’s recent military momentum. As we have previously noted, we have heard frustration from Ukraine’s Baltic backers about Russia’s resilient energy revenue and the way Washington prioritized keeping Russian barrels on the market … . We will be closely watching to see if Ukraine starts targeting more energy export infrastructure … we could envision Ukraine rethinking the energy deal made with Washington and moving to strike a more material blow against Russia’s revenue machine. Hence, we could see a shift to targeting export facilities, especially if Russia continues to make battlefield gains and Western aid is imperiled.”
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Goldman Sachs’ weekly Briefings report describes the “most sought after hedge fund strategy”,
“Asset allocators are, for a second year in a row, more interested in hedge funds that invest in credit than in any other strategy. The demand for credit hedge fund strategies (which include the trading of assets like company debt, structured credit, and some sovereign instruments) comes after both bonds and stocks rallied last year, according to the Goldman Sachs Prime Services Hedge Funds Insights and Analytics team’s 2024 Hedge Fund Industry Outlook. Capital allocators reported an average gain of 6.4% from their hedge fund portfolios between January and November 2023, up from a 0.9% loss in the same period in 2022. The report includes a survey of responses from 358 allocator firms globally, who control more than $1 trillion of assets allocated to hedge funds, as well as responses from 302 hedge fund managers who are clients of Goldman Sachs’ Prime Services business and collectively manage more than $1 trillion … Some 44% of investors plan to increase their exposure to hedge funds with a credit strategy this year and only 3% plan to decrease it ... Despite positive returns (on average) in 2023, hedge funds underperformed traditional 60/40 portfolios (which allocate 60% of funds to S&P 500 stocks and 40% to 10-year US Treasury bonds) by the widest margin in since 2000″.
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BofA Securities investment strategist Michael Hartnett’s weekly Flow Show report is out and quotable as usual in its succinct style,
“The old world is dying, and the new world struggles to be born; now is the time of monsters”…head of central bank on US dollar hegemony at BofA conference … US govt debt now rising $1tn every 100 days…why UST bond yields threatening breakout up toward 4½% … macro shifting from Q4/Q1 “Goldilocks” to Q1/Q2 “Stagflation”; inflation up in DM & EM (EM central banks now “pausing” cuts ) while US labor market finally cracking (full-time payrolls down ~3mn jobs in 3 months, quits ratio and small business labor demand down to lowest since Q2′20 lockdown) … [Stagflation is] why oil now handily outperforming Nasdaq YTD”
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Diversion: “See the 2024 Finalists for the World Video Game Hall of Fame” – Gizmodo
Scott Barlow