Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Hugo Ste-Marie warns Canadian investors to “prepare for the worst” as TSX earnings season approaches,
“TSX Q3/22 EPS Preview — Earnings Plateau at Best, but Prepare for Worse ... OUR TAKE: [Negative]. According to Bay Street, TSX EPS Q3/22 are on course to contract by 4.2% quarter-over-quarter to C$374 from last quarter’s all-time high of C$390, delivering its first sequential decline since Q3/21. TSX EPS have enjoyed an impressive profit recovery post Q1/20 lows. Yet, at this stage, most indicators would argue that we are past peak growth. At best, we will likely endure another earnings plateau through 2023 and 2024 (according to consensus). The last two periods of earnings stagnation (2011-2013 and 2018-2019) saw uneven TSX price performance as well as short and shallow bear markets. Given decelerating growth, shaky market sentiment and flat to down earnings trends, we expect more severe negative stock price reactions in case of unimpressive results.”
“Scotiabank strategist warns Canadian investors to ‘prepare for the worst’ as TSX earnings season approaches” – (research excerpt) Twitter
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BofA Securities investment strategist Michael Hartnett’s weekly Flow Show report continues to be informative, alarmist and succinct,
“UST 2-year yield now 280bp higher than SPX dividend yield, widest since ‘07; investor flooding to short-duration bonds … Equity risk is this continues via rotation from stocks; bull case is no new highs in US$ signals monetary policy shift from Quantitative Tightening to ‘Quantitative Tinkering’ … Flows to Know: a. $103bn inflow to cash Q4 big contrast with $213bn outflow Q1- Q3 … Perceived safe haven bid; b. buying Treasuries, selling IG/HY bonds & TIPS ... BofA Global FMS [fund manager survey] shows huge equity UW yet still no final capitulation in equity flow … We bearish despite ubiquitous bear sentiment; inflation shock, rates shock ongoing + recession shock & credit shock starting; new highs in yields, spreads, low in stocks coming … US dollar the short of ‘23, final capitulation will be led by unwind of hubristic longs in large cap growth stocks.”
“BofA’s Hartnett .... still bearish” – (research excerpt) Twitter
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The Financial Times reported on comments buy a major commodity trading firm regarding a future shortage of copper,
“Kostas Bintas, co-head of metals and minerals trading at Trafigura, said the copper market is today running with inventories that cover 4.9 days of global consumption and is expected to finish this year at 2.7 days, according to its own forecasts. Copper stocks are usually counted in weeks … Limited inventories raise the risk of a sudden spike in prices should there be large drawdowns and a dash among traders to secure supplies… “While there is so much attention being paid to the weakness in the real estate sector in China, quietly, the demand for infrastructure, electric vehicle-related copper demand, more than makes up for it,” Bintas said. “It actually not only cancels completely the real estate weakness, but also adds to their consumption growth increase.””
“Trafigura warns the world is running low on copper” – Financial Times (paywall)
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Diversion: “Rare tropical fungus randomly blooms in the palm of a US teen’s hand” – ArsTechnica
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