Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Wall Street’s race to get their year ahead outlooks published began with Morgan Stanley Monday (my emphasis),
“We expect a broad-based recovery, both geographically and sectorally, to take hold from March/April onwards. Driving this synchronous recovery will be a more expansive reopening of economies worldwide and the extraordinary monetary and fiscal support now in place. Global GDP, already at pre-COVID-19 levels (based on seasonally adjusted GDP levels), continues to accelerate and is on track to resume its pre-COVID-19 trajectory by 2Q21 … A super-charged take-off lifts us back to pre-COVID-19 output levels … Vaccine availability will provide another uplift”
Morgan Stanley expects that corporate capital expenditure will pick up strongly in 2021, benefitting materials and industrials stocks. This is good news for the TSX.
"@SBarlow_ROB MS expects “super-charged” global economic recovery' – (research excerpt) Twitter
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Scotiabank strategist Jean-Michel Gauthier details the “stunning” snapback in value stocks relative to momentum (my emphasis),
“Value Knocks Out Tech as Momentum Shifts … Value Whipsaws Investors as Momentum Tumbles. An initial Momentum/Growth over Value move following the US election quickly reversed as it became more likely that Biden would become the next president. The follow-up Value melt-up has been nothing short of stunning. Shifts in Momentum Lead to Changing SQoRE [Scotia’s quantitative stock ranking ranking process] Sector Line-Up. The underlying Momentum shakeup is leading to shifting sector preferences. Winners include Healthcare and Real Estate. Losers include Technology and Gold miners. Financials and Energy are more muddled, despite some individual stocks' extreme bounce… highly consensual positioning in Momentum/Tech had put the sector at risk of a reversal. Quality is also to be avoided in a risk-on environment,”
“@SBarlow_ROB BNS: winners and losers from ‘stunning’ value rally vs momo” – (research excerpt) Twitter
“This stock could be on the verge of doubling if we are truly seeing a new dawn for value investors” - Rothery, Globe Investor
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Citi global strategist Robert Buckland predicts a huge sea change for markets, but not a lasting one, as the U.S. 10-year bond yields climbs above 1.25 per cent,
“Should investors focus on the current mess or look forward to an improvement next year? Citi US rates strategists are in the latter camp. To them, the vaccine announcement is “unambiguously bearish for treasuries”… We think that would be unambiguously bullish for the relative performance of Value stocks, especially Financials which tend to track nominal yields… Investors should Overweight global Cyclical sectors, and Underweight Defensives and Growth sectors … A levelling out in bond yields [ in late 2021] would remove a key driver of the current rotation, especially into Financial stocks. … with nominal yields capped, real yields would start to fall again which would help Tech/Growth stocks. That’s why we resist the temptation to say that this it, the moment to call a giant multi-year switch back to Value strategies… after all, the previous biggest daily rotation to Value was on 19th April 1999. Back then, Growth came tearing back, beating Value by 33% over the next 12 months. Woe betide anyone who saw that as the big turning point.”
"@SBarlow_ROB C: “Dont chase too hard” – (research excerpt) Twitter
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Friday: “The most overbought and oversold stocks in the TSX” – Inside the Market
Diversion: “Social democracy or feudalism” – interfluidity
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Scott Barlow