Morgan Stanley strategist Edward Stanley identified what he believes are the 10 biggest themes in global markets for 2023. I’ll list all of the themes first before getting to those I find most relevant: ‘Earthshots’, the rise of India as a lucrative investing destination and upcoming obesity drugs.
The 10 themes outside of those three involve downward profit margin pressure, bloated developed world inventory levels creating deflationary pressure, accelerated profit growth for ESG companies, venture capital investment, China re-opening, Saudi Arabian socioeconomic restructuring, and artificial intelligence.
Earthshots is a term Morgan Stanley uses for the more than 50 public companies the firm has identified that have “game-changing sustainability technology.” Mr. Stanley describes the decarbonization process as of right now as lethargic, but he expects the pace to ramp higher.
The report lists cutting edge sustainability companies like Boston-based Ginkgo Bioworks, Codexis Inc., and Oxford Nanopore Technologies PLC from the U.K., along with existing companies he calls ‘enablers’ like Siemens AG, Sunrun Inc., and Occidental Petroleum Corp.
Where India is concerned, the strategist believes that a combination of services offshoring by the developed world, manufacturing investment, the energy transition and the country’s existing advanced digital infrastructure will make India the world’s third largest economy (currently fifth) and stock market (currently eighth) by the end of this decade.
Morgan Stanley expects that India will be responsible for 20 per cent of global GDP growth in the 2020s.
Mr. Stanley sees new obesity drugs from Novo Nortdisk and Eli Lilly with exponential sales growth thanks to social media. He notes that obesity drug Wegovy and diabetes treatment Ozempic are mentioned frequently on social media – particularly TikTok – and the medium’s fixation on fitness and health will help drive sales.
-- Scott Barlow, Globe and Mail market strategist
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The Rundown
This is the best time in ages to crashproof your RRIF
Seniors contemplating a withdrawal from their registered retirement income fund in early 2023 have tough choices to make after the double-barrelled decline of stocks and bonds last year. What do you sell to free up money for your mandatory annual RRIF withdrawal? Rob Carrick has some thoughts on RRIF preparedness.
U.S. stock swoon resets valuations but recession risk, rates cloud outlook
U.S. stocks are starting 2023 at much cheaper levels after Wall Street’s biggest swoon in 14 years but the potential for a recession combined with higher interest rates means equities may not be priced low enough to lure investors, reports Reuters’ Lewis Krauskopf.
Also see: Citigroup cuts U.S. stocks to ‘underweight’, favors European equities in 2023
Oil price flip highlights Fed’s inflation base effect jam
The global benchmark price of oil fell below its year-ago level this week for the first time in almost two years, a significant marker that intensifies scrutiny on the Federal Reserve’s persistently hawkish stance on inflation. Jamie McGeever of Reuters explains.
The secret behind the outperformance of value stocks
In the midst of the problems experienced with growth stocks over the past year and a half, investors have proclaimed that “value is back” – but a careful examination of stock returns over long periods shows that value never really went away. Investing professor Dr. George Athanassakos explains.
Others (for subscribers)
The highest-yielding stocks on the TSX, plus risk data
Number Cruncher: Seven automaker stocks challenging Tesla’s dominance with electric vehicles
Friday’s analyst upgrades and downgrades
Thursday’s analyst upgrades and downgrades
Friday’s Insider Report: CEO invests $1-million in this oversold energy stock
Canadian dollar to rebound in 2023 if economic uncertainty clears: poll
Canadian ETFs raked in money in 2022 while mutual funds faced large outflows
Globe Advisor
Why this money manager is steering clear of Canadian stocks and adding U.S. banks and tech
How tontines can reduce longevity risk in retirement portfolios
U.S. junk loan investors brace for increase in downgrades and defaults
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Ask Globe Investor
Question: I hold Firm Capital MIC (FC-T) in my RRIF and I am becoming increasingly concerned. My cost is $14.03 so I am down about 24 per cent. Of course, I love the income, but the market appears to be saying that it is at risk. Being in a RRIF there is not even an opportunity for tax loss selling. Would appreciate your guidance. - Richard I.
Answer: This is a long-running story with this company. FC is a mortgage investment corporation, which means it is highly interest-rate sensitive. The share price will rise when interest rates fall and vice-versa. I have always encouraged readers to focus on the dependable cash flow, which hasn’t changed in years, and ignore the month-to-month price movements. I encourage you to do the same.
The company recently reported third quarter earnings of $8.2-million, an increase of 8.1 per cent from the same period last year. No sign of any financial distress there.
If you can’t live with the ups and downs, then wait for the next interest rate cycle and sell when the shares get close to your cost price. But frankly, I’d keep it for the dependable cash flow.
--Gordon Pape (Send questions to gordonpape@hotmail.com and write Globe Question in the subject line.)
What’s up in the days ahead
Beleaguered Algonquin Power and Utilities will hold an investor day next week - and the stock is seeing some modest gains ahead of the event. Is this a setup for more gains to come? David Berman this weekend will have some thoughts.
Welcome to 2023: World market themes for the week ahead
Click here to see the Globe Investor earnings and economic news calendar.
Reader participation
Are you a retiree interested in discussing what life is like now that you’ve stopped working? Globe Investor is looking for Canadians to participate in its Tales from the Golden Age feature, which discusses the realities of retirement living. If you’re interested in being interviewed for this feature, and agree to use your full name and have a photo taken, please e-mail us a few details about your retirement life so far at: goldenageglobe@gmail.com
Compiled by Globe Investor Staff