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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

BofA Securities’ monthly survey of global portfolio managers uncovered extreme pessimism,

“Bottom line: short-term ‘pain trade’ is up (once again) for risk assets; FMS [fund manager survey] sentiment super-bearish ... Cash levels hit 6.1% (only ever higher after 9/11); max bear sentiment + benign data = SPX retests (& fails) 4300; we stay fundamentally & patiently bearish … Global growth expectations near all-time lows: net 72% expect weaker economy next year; and net 79% expect lower inflation in the next 12 months … Cash levels jump from 5.7% to 6.1% as record net 60% investors taking lower-than-normal risk … Most “crowded trade” = long US$ (contrarians note most extended FMS [fund manager survey] position since “long US tech” in Nov’20); cash allocation at record overweight (62%), stocks at record underweight (-52%) … Contrarian trades: unambiguously “short US$”, ‘long equities-short cash’, ‘long EU cyclicals-short US defensives’, ‘long consumer discretionary-short energy’.

“‘Short term pain trade is up for risk assets’” - (research excerpt) Twitter


Morgan Stanley energy analyst Martijn Rats lowered his forecast for oil prices,

“The oil market is telling a clear story that physical tightness has waned. Spot prices have fallen, forward curves have flattened, physical differentials have come in, and refining margins have weakened. A growth slowdown in all main economic blocks has pointed to weaker oil demand for some time, and this is also now visible in oil-specific data. China has been a particularly important contributor to this,… The oil market’s structural outlook remains one of tightness, but for now, this is offset by cyclical demand headwinds. Following the recent correction, and with a slight tightening in our 2023 balance again, we suspect the majority of the decline has now played out. A renewed oil price rally is not imminent as long as macro-economic conditions remain so weak. Yet, after recession comes recovery. Once demand picks up, the structural issues will emerge once more. We lower near-term oil price forecasts, but see a firmer market again from 2Q 2023 onwards. "

Mr. Rats lowered this third quarter forecast for WTI crude to US$93 from US$107 and his end of year estimate from US$97 to US$91.

“Morgan Stanley lowers near term oil price forecasts” - (table) Twitter


Scotiabank strategist Shaun Osborne is noticeably frustrated with the loonie’s inability to follow fundamental value,

“We are making some further changes to our CAD forecast—a continuation of a rather painful process (for us) that reflects the CAD’s singular failure to respond to bullish impulses (such as the positive terms of trade shock that resulted from the surge in commodity prices through 2020/21) as well as the USD’s persistent strength. Meanwhile, our macro-economic views continue to reflect relative stronger growth in Canada versus the US this year and next while we now expect the BoC policy rate to peak at 3.75% in Canada this year, a little above the (revised) 3.5% forecast for the Fed’s terminal rate. You can find full details of our macro-economic, rates and FX forecasts in your inboxes … We are now forecasting a year-end USDCAD rate of 1.30 [C$ 0.77] (versus 1.27 in our last forecast) and 1.25 [C$0.80] for the end of next year (from 1.23). Our other G10 FX forecasts are unchanged… "

“Scotia is frustrated with CAD” - (research excerpt) Twitter


Diversion: “Woman discovers live frog in sealed lettuce container in London, Ont., grocery store”- CBC

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