Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO chief investment strategist Brian Belski interprets recent market action as a “buy Canada trade,”
“While there has been some concern that recent market activity signals a more cautious and defensive rotation, we believe this is a misinterpretation of the recent outperformance of these more traditionally defensive sectors. Yes, Real Estate, Communication Services, and Utilities have been the top three performing sectors quarter to date. However, our view remains resolute, this is a catch-up trade for these “oversold” higher-yielding sectors, which are rebounding in tandem with moderating longer-term interest rates. Furthermore, market strength has been relatively broad, with almost all sectors posting positive returns quarter to date. Our factor profile models have also exhibited broad-based gains in July. … From our perspective, this is a ‘Buy Canada’ trade that is exhibiting improvement in overall equity market flows with a tilt toward oversold and interest sensitive areas, NOT a defensive rebalance”
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RB Advisors published their annual Charts for the beach feature,
“Individual investors have become massive risk takers. The two charts below (courtesy of Michael Harnett at BofA Securities) show private client equity allocations and the beta of their top equity holdings. At the beginning of the bull market in 2009, individual investors’ equity allocation was only 39% and their beta was a very conservative 0.75. Today, the allocation is 63% and the beta is a whopping 1.25. We continue to believe there is a once-in-a-generation opportunity in the US and global equity markets well beyond the 7 stocks that have caught everyone’s attention … Because long-term investment returns are largely a function of the abundance or scarcity of capital, the current flood of capital toward AI investments suggests better longer-term investment opportunities might be elsewhere. Deglobalization and the dire need for the US economy to regain its independence seems a much more ignored and, therefore, attractive long-term theme. The US economy could be in the early stages of a 10- to 20-year metamorphosis”
“Charts for the Beach” – RB Advisors
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Citi’s global economics team thinks the world economy is weak enough for a wholesale central bank easing cycle,
“The global economy looks likely to register annual growth of 2.4% in 2024, only a modest slowdown from last year’s pace as H1 data have broadly surprised to the upside. In recent weeks, however, downside risks have intensified as data for the United States, euro area, and China have all fallen short of expectations. Further adding to these challenges are headwinds from ongoing geopolitical tensions. Still, the global PMIs through July have held up well and show few if any signs of a sharp slowdown. Inflation meanwhile continues to moderate with global headline and core inflation now running in the vicinity of 2½%. More favorable inflation data alongside concerns about downside risks to global activity has opened the door for a full-blown central bank easing cycle that is likely to pick-up steam in the months ahead”
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Diversion: “Believe It, Ripley: The Case for ‘Alien’ as Hollywood’s Greatest Franchise” – The Ringer