Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities chief investment strategist Michael Hartnett remains among the most bearish strategists in global finance and his weekly Flow Show report is as quotable as always,
“Markets are great storytellers … The story of 2022 is ‘inflation shock = rates shock = recession shock’; the larger story of the 2020s is regime change, higher inflation, higher rates, higher volatility, & lower asset valuations, driven by trends in society (inequality), politics (populism/progressivism), geopolitics (war), environment (net-zero), economy (de-globalization), demographics (China population decline), all inflationary, all favor cash, commodities, real assets, volatility, small cap, all damage bonds, credit, private equity, tech stocks … Institutional & private client AA + equity flows not at capitulation lows; and of course true capitulation = Fed capitulation, and systemic event & unemployment rate rise required first; bottom tactical line is tape v vulnerable to bear rally but we would still argue “sell-any-rips”.”
Investors should keep in mind that this is only one person’s view and while other strategists – Credit Suisse’s Andrew Garthwaite and Morgan Stanley’s Michael Wilson are prominent examples – Mr. Hartnett is still an outlier in terms of how pessimistic he is.
“BofA’s Hartnett .... still bearish” – (research excerpt) Twitter
Reuters energy specialist John Kemp warned readers about the dangers of a global diesel fuel shortage,
“Global distillate fuel oil shortages signal the business cycle is peaking and a period of slower growth or even a recession is imminent to bring consumption back in line with production… U.S. distillate fuel oil inventories stood at 105 million barrels last week, the lowest for the time of year since 2008… The resulting shortages and soaring prices show the economy is running into binding capacity constraints and must enter a slower growth phase until more refining capacity can be made available… Distillate traders also seem to be anticipating a slowdown in the business cycle and diesel consumption, with the crack spread [definition here] for European gas oil over Brent halving to $27 per barrel from $55 at the end of April.
“Column: Global diesel shortages herald imminent economic slowdown” - Kemp, Reuters
BMO senior economist Robert Kavcic previewed a detailed report on the domestic housing market to be published Friday afternoon. He mentioned in passing (emphasis below) that BMO believes the housing market peaked earlier this year,
“Real home prices in Canada have historically grown at about 3% per year dating back to the early 1980s, roughly reflecting inflation, real wage growth and gradually falling interest rates. In this latest episode, even as inflation has accelerated to multi-decade highs, real home prices have surged by more than a third in the span of two years, clearly stretching beyond that long-run baseline growth trend. [Friday’s] Focus feature will look at a home price correction in more detail. For now, just note that as of the first quarter, when we believe the market peaked, real Canadian home prices sat 38% above trend, the widest deviation in the past 40 years.”
“BMO on Cdn housing market. They really buried the lede here” – (research excerpt) Twitter
Diversion: “The Online Spider Market Is Massive—and Crawling With Issues” – Wired
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