Every day roundup of analysis and evaluation from The Globe and Mail’s market strategist Scott Barlow
It’s uncommon {that a} distinguished strategist like Morgan Stanley’s Michael Wilson is as adamantly bearish as he’s. His month-to-month chartbook begins with a powerful warning to shoppers,
“March is a excessive danger month for the bear market to renew. With the fairness market displaying indicators of exhaustion after the final Fed assembly, the S&P 500 is at important technical help. Throughout bear markets Subsequent Twelve Month EPS estimates sometimes flatten out between quarterly earnings seasons earlier than resuming the downtrend. Shares are likely to determine it out a month early and commerce decrease and this cycle has illustrated that sample completely. We predict rates of interest and the US greenback each have to fall for worth to carry right here. Conversely, if charges and the greenback transfer larger, the technical help ought to fail shortly. Valuation is broadly costly. Fairness Threat Premium reached the bottom level degree since 2007, bottoming close to 150bps.”
“‘March is a excessive danger month for the bear market to renew’ (MS)” – (analysis excerpt) Twitter
***
Scotiabank strategists have been touring North America and discovering very confused institutional traders,
“We held in-person conferences with institutional traders in Toronto, Montreal, and Mexico over the previous couple of weeks. Whereas we now have been doing this job for a while now, we now have not often seen a lot confusion amongst traders. Confusion concerning each the macro-outlook (comfortable touchdown, laborious touchdown, no touchdown?) and portfolio positioning (offense, protection, barbell) is elevated. Listed here are some key highlights from conversations with shoppers: Conflicting macro alerts. Positioning: From Protection to extra Impartial. ‘Impartial’ would completely describe positioning given the dearth of sturdy conviction on one facet or the opposite. Sideways market. Earnings outlook: Purchase-side banking on delicate EPS decline. Now we have not seen many US fairness bulls. Locals love Mexico . Conclusion. From our seat, our primary concern stays the timing of the recession as we nonetheless doubt the financial system will simply swallow 500+ bp of tightening. It might take longer for the financial system/client to really feel the affect than initially anticipated as a result of sturdy job market and large fiscal switch throughout the pandemic, however all our indicators nonetheless level to extra hassle forward. Higher alternatives on the lengthy facet will happen in coming months. Excessive money yields supply an honest different for now. Asset Combine Mannequin: Our mannequin nonetheless loves Money.”
“Scotiabank strategists go touring, discover confused PMs” – (analysis excerpt) Twitter
***
Citi mining analyst Ephrem Ravi thinks copper costs are forward of themselves, likes aluminum,
“Our take is that the headline [Chinese economic] knowledge appear overly exuberant. Nonetheless, sentiment in China is clearly enhancing and we consider aluminium is greatest positioned to learn from that. In some small half the extraordinarily sturdy headline print in China displays seasonal elements, although the massive issue main us to query the information is that it seems each element noticed huge will increase … We proceed to search out that copper is pricing a powerful China rebound already, and we advocate ready for alternatives to ascertain long-term copper publicity at greater than $8,500/t. We nonetheless anticipate a chance will come this 12 months, based mostly on our economists’ expectation for sticky inflation and the Fed responding accordingly (driving a sustained items, building and funding recession exterior of China)”
***
Diversion: “A Snow-Buried California Declares State of Emergency” – Gizmodo
Tweet of the Day:
