Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Hugo Ste-Marie sees institutional flows into gold,
“Gold equities have powered ahead this year, delivering strong performances. The TSX Gold index is thus up 45% so far in 2024, and the GDX ETF is posting a gain of 42%. After such a run, should we talk about exuberance? The short answer is not yet. In prior gold bull markets, TSX Gold and Precious Metals sector’s weighting in the TSX Composite reached much higher levels. With its current weighting, it’s hard to suggest the sector has grown to the point where investors need to be contrarian. In fact, the sector has probably reached a point where flows in the space could accelerate because it’s just getting harder to ignore. Here’s why we believe it’s not too late to increase exposure: Gold equities have lagged the bullion. Gold equities: Limited outperformance. Fundamentals improving: profitability up, leverage down. A contested election: Be careful what you wish for”
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BofA Securities quantitative strategist Nigel Tupper’s global wave indicator combines readings on worldwide industrial and consumer confidence, unemployment, producer prices, credit spreads and earnings revisions to assess the momentum in the most important factors driving equity returns,
“The signal from the Global Wave remains positive despite the seven components providing a mix of positives and negatives. In aggregate, the Global Wave fell slightly last month, but not enough to trigger a peak signal. Our other indicators of the global cycle remain resoundingly positive, including the improving global earnings cycle and the rising Global News Pulse. In addition, our “Market Trough Monitor” provided a positive signal this month, and global equities have rallied for an average of two years after previous signals. While the components of the Global Wave are teetering, other indicators of the global cycle remain supportive of equities and cyclicals. Two components improved, three moderated During the month, a lower Global Earnings Revision Ratio weighed on the Global Wave. Moderating Global Capacity Utilisation was offset by a positive contribution from Global Unemployment. Confidence indicators were mixed, with Industrial Confidence falling in 58% of countries, while Consumer Confidence improved in 62% of countries”
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BMO senior economist Sal Guatieri sees a 50 basis point cut in rates today at 9:45,
“BMO Economics expects the Bank of Canada to step up the pace of easing with a 50-bp rate cut on Wednesday. Both inflation and the economy are weaker than the Bank expected. Money markets also lean in this direction, and there is even loose talk of a larger move. How rare is a 75-bp rate cut? Well, even during the 2020 shutdowns the Bank kept rate cuts to 50 bps, albeit rifling off three straight ones within a month. You need to go back to the financial crisis (2008) to find the last time the Bank took out the 75-bp bazooka. The big guns are usually reserved for crises and recessions, and a sub-target inflation rate and 6.5% jobless rate don’t exactly meet that threshold. Moving 50 bps sends a message that the Bank is serious about defending the 2% target but not panicking about the economy”
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Diversion: “‘Flesh-Eating’ Bacteria Surge in Florida Floodwaters After Back-to-Back Hurricanes” – Gizmodo