A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Equity markets have been boosted by expected interest rate cuts, but, at the same time, the U.S. and global economic backdrop continues to deteriorate.
Morgan Stanley strategist Serena Tang detailed the slowdown in a Wednesday report,
“Data tracked by the U.S. cycle indicator have generally deteriorated further. The weak data contribute to a continued ‘downturn’ prognosis in our model, and our U.S. economists believe that downside risks to growth now means that the Fed will likely cut rates by 50bp this month. .. ‘Downturn’ means lower returns for equities and credit, better returns for bonds; rotation time draws near: This part of the cycle sees bonds outperform stocks and credit. ... Our global economics team argues [that the U.S./China trade] détente does not do enough to remove the uncertainty already created by trade tensions, and they remain an overhang on corporate confidence. The team has now lowered its global growth forecast to 2.9%Y by 4Q19, a six-year low”
“@SBarlow_ROB MS: global economy remains in downturn’ – (research excerpt) Twitter
“Weak economic data, tariff concerns weigh on stocks globally” – Reuters
“ @SBarlow_ROB Global trade = still turrble’ – (chart) Twitter
“ South Korea cuts growth views as trade war batters exports” – Reuters
“@SBarlow_ROB Citi global economic surprise index “ – (chart) Twitter
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U.K.-based Citi strategist Jonathan Stubbs discussed “The death of value” in a report of the same name, and provided some top European stock picks,
“Value is back to 2009 on P/E relative & to 2000 on P/book relative; Value around record cheaps vs Quality and Low Risk. History says ‘buy Value’… History, i.e. valuations, tells investors to buy Value at these levels. But, it is hard to do in a “T+0” world and against a backdrop of endcyclitis. For those happy to dip a toe, we suggest Value+ strategies: Dividend Kings, “Call Option”. KBC, Michelin, Tesco, BP, Rio Tinto, UPM, Volvo show up”
“@SBarlow_ROB C: the Death of value’ – (research excerpt) Twitter
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Morgan Stanley energy analyst Martijn Rats provided an oil forecast that’s much better suited to traders than longer-term investors,
“In the short-term, there are a number of supporting factors: With demand typically accelerating over the summer period, the market will likely go into a temporary deficit in 3Q. After that, the IMO 2020 regulation will have a positive effect on refinery crude runs in 4Q/1Q. Both factors are upside risks to oil prices … Notwithstanding OPEC's agreement, medium-term fundamentals are not strong. The slowdown in oil demand growth that emerged earlier this year has yet to turn around, with early indicators for May still showing almost no growth. At the same time, non-OPEC is set to grow >2 mb/d in 2020 - the third consecutive year’
“@SBarlow_ROB MS on oil: seasonally strong, structurally soft” – (research excerpt) Twitter
“Oil prices rise after U.S. crude stockpile drop” – Report on Business
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Tweet of the Day:
Diversion: “Why Are There No Mosquitoes at Disney World?” – Youtube
Scott Barlow