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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Credit Suisse U.S. equity strategist Jonathan Golub, who six months ago was among the most bullish of his profession, published Earnings Estimates Collapsing on Wednesday,

“Since mid-June, bottom-up earnings estimates for 3Q and 2023 have fallen -5.5% and -3.7%. This is surprising given the strong positive surprises (+4.9%) witnessed in 2Q. While it is typical for projections to decline throughout the quarter, the recent trend is much weaker than normal … 3Q and 2023 revisions are negative across all groups, save Energy. [Technology sector] projections have fallen the most, continuing their recent weakness… Although revisions are negative, projected EPS growth rates remain positive for the remainder of 2022-23. While 3Q growth has fallen to 4.7%, EPS should expand 9-10%, assuming similar beats as experienced in 2Q.”

“CS’s Golub” – (research excerpt) Twitter


Morgan Stanley economist Lenoy Dujon discussed the potential effects of Bank of Canada interest rate announcement on the loonie,

“Swap pricing implies that a 75bp BoC hike is almost entirely priced. Another 100bp hike would boost CAD broadly as the market would price in a significantly higher terminal rate. Inversely, a 50bp hike would weigh on CAD. The CAD response to a 75bp hike (which our economists expect) would therefore depend on the BoC’s tone. We would expect CAD to soften over the meeting if the BoC expresses significant growth concerns, or emphasizes that inflation may be subsiding, or that the pace of hikes will slow as rates rise above neutral. We expect CAD would gain over the meeting if the BoC emphasizes that inflation will likely remain too high for some time or that the conditions that justified a 100bp hike in July still apply.”

“BoC and CAD (MS)” – (research excerpt) Twitter


BofA Securities U.S. quantitative strategist Savita Subramanian cautioned clients against trying to time the market, but then provided a bunch of tools to help them try,

“We culled macro and bottom-up data encompassing policy, valuation, growth, sentiment and technical trends to determine what typically occurred ahead of prior market bottoms. We found 10 consistent triggers. Today, only 4 have been triggered but the last seven prior market bottoms saw 80%+ triggered … 7 of the last 7 bear markets ended after a Fed rate cut … Stocks aren’t cheap enough: Valuations for the S&P 500 are rich on almost every measure we track … Bulls point to better-than-feared earnings (see 31 July note) and economic resilience, but we are still in the early innings of a downturn. Signs of improving macro (ISM PMI, yield curve steepening) were evident in prior market bottoms… It’s better to be late than early: NTM [next 12 month] market returns were stronger after more indicators had been triggered. 80%+ of signposts triggered were followed by 19% NTM avg. returns with a 78% positive hit rate; <80% of indicators triggered were followed by negative NTM returns”

“”Still early innings of a downturn” (BofA)” – (research excerpt) Twitter


Diversion: “California Is Super Hot, on Fire, and Expecting Blackouts” – Gizmodo

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