Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO economist Sal Guatieri highlighted the Federal Reserve’s preferred recession indicator where the news is not great,
“It’s not just oil prices that are under the weather these days. According to the Fed’s recession equation, which is based on the spread between the 3-month Treasury forward rate 18-months ahead and the current rate, investors are placing 99% odds on a recession occurring in the year ahead. That’s even higher than before the Great Recession. No wonder the Fed’s staff now expects a downturn (albeit a mild one) later this year. We’ll see if Chair Powell is similarly downbeat at his press conference tomorrow, thus hinting at a rate pause going forward.”
“BMO: Fed’s recession indicator” – (research excerpt) Twitter
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Morgan Stanley’s daily research recap included the firm’s top picks in cybersecurity,
“MS Research Analyst Hamza Fodderwala highlights that despite pockets of weakness, his conversations at the RSA conference suggest a healthy security spending environment. Bottom line, he came away more constructive on the security demand environment versus the market with security stocks down -10% over the last week and many retesting the lows from earlier this year. He thinks investors shouldn’t overreact negatively to last week’s results from Tenable (EW [equal weight] , $44 PT [price target]) and Cloudflare (EW, $43 PT) and expects the rest of Q1 earnings to mostly deliver in-line or better-than-expected bookings. He continues to favor consolidators like PANW (OW, $255 PT) and FTNT (OW, $77 PT) as his most preferred names, followed by CRWD (OW, $163 PT) and CYBR (OW, $173 PT). With the recent sell-off, he also thinks ZS (EW, $120 PT) and OKTA (EW, $84 PT) are nearing a bottom at current levels”
“MS top picks in cybersecurity” – (research excerpt) Twitter
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Citi global quantitative strategist Alex Saunders remains bearish,
“The closest analogues to today remain the Volcker 79-81 hiking cycle and its aftermath, which was not bullish equities. We also draw from the end of 2018 hiking cycle and the debt ceiling crisis of 2011. Bonds are strongly favored over equities which agrees with our hiking cycle theme and debt ceiling analysis. Good news remains bad news as equity return/[economic] surprise correlations stay negative but are rising…High inflation, even though declining, weak leading indicators and tight financial conditions mean our model continues to favor bonds over equities … Equities are still expected to deliver negative excess (after cash) returns … [We are] underweight the more cyclical energy and base metals commodities vs precious. EM credit preferred to IG and high yield.”
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Diversion: “Artificial Intelligence is now writing Beatles songs: Listen” – A Journal of Musical Things
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