A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
CIBC’s interest rate strategist Ian Pollick is my pick as the best analytical source regarding domestic bond yields.
Mr. Pollick’s report this morning was full of interesting points on a variety of relevant credit issues,
“The momentum in global rates is being imported into Canada to a larger degree than usual, and that reflects the unfortunate starting point for the economy. Our modified Taylor Rule (which uses dynamic real neutral rates) suggests policy is 50.0bps too restrictive today … Ultimately we are not fussed about the shape of the curve, inversion is a natural consequence of: i) starvation for duration as corporate issuance has waned; ii) term premia are lower today than any other time in the past decade, and; iii) Canada usually trades flatter given smaller net changes in the bond stock”
“@SBarlow_ROB CM's Pollick: "Ultimately we are not fussed about the shape of the [Canadian yield] curve"” – (research excerpt) Twitter
“What Does the [U.S.] Yield Curve Inversion Mean?” – Crossing Wall Street
“Canadian mortgage rates are falling as bond yields slide lower” – CBC
“Goldman Joins Chorus Warning Against Yield Curve Panic” – Bloomberg
Counterpoint: “@BNNBloomberg "The yield curve is the best economist out there": CIBC's Benjamin Tal” – Twitter/BNN (video)
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Morgan Stanley’s equity strategists Michael Wilson and Andrew Sheets have been the best forecasters since the beginning of 2018, in my opinion.
Mr. Wilson’s most recent report, however, contains an admission that he under-estimated the power of loosening financial conditions to push the market higher. He does believe that current U.S. equity multiples are as high as they’re going to get,
“ Obviously, looser financial conditions and falling interest rates are positive for stocks, and likely have been responsible for the bulk of the move in risk assets this year – a move we think makes perfect sense, but frankly underestimated. Specifically, equity multiples expanded from 13.5x in late December to 16.7x last week … Based on our [Equity Risk Premium]/Rates Valuation Framework, 16.7x is as full as US equities should trade… With the Fed now effectively cutting and stocks fully valued, we think betting on another "look through" quarter is a bad risk reward.”
“@SBarlow_ROB MS' WIlson: "With the Fed now effectively cutting and stocks fully valued, we think betting on another "look through" quarter is a bad risk reward." – (research excerpt) Twitter
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Apple presented their new streaming television business Monday product but analysts are largely unimpressed,
“We see limited pricing power given the small content library at launch, and if Apple is playing the long game here it could pressure financials for years… The Apple TV app will integrate content from Apple TV+ with iTunes, HBO, Amazon Prime Video, Showtime, Hulu, and broadcast TV and cable channels. It will be compatible with smart TVs and streaming devices like Roku and Amazon Fire TV. But this is just a new way to package the same business Apple already does today.”
“@SBarlow_ROB Jefferies unimpressed by Apple's new streaming initiative,” – (research excerpt) Twitter
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Tweet of the Day:
Diversion: “ The First Rule of Making ‘Fight Club’: Talk About ‘Fight Club’” – The Ringer
Print column: “Canadian investors too dismissive about “The Big Short” on domestic bank stocks“ – Barlow, Inside the Market
Scott Barlow