Barlow’s Research Roundup: ‘Sleep like a baby’ portfolio strategy performing well in 2026

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

‘Sleep like a baby’

BofA Securities investment strategist Michael Hartnett’s weekly flow Show report presents the sobering note that the semiconductor index (SOX) is the most overbought versus its 200 day moving average since June of 2000 and also highlights strong performance from the “sleep like a baby” asset allocation strategy,

“SOX index most bubbly overbought vs. 200dma since Jun’00 … investors...upside breakout blue collar semis (ON, STM, MCHP, TXN...) implies surge in US ISM to >60 … stocks (14% annualized) & gold (31%) tracking rare 4th year of double-digit gain; stock streaks driven by war (‘42-‘45), peace (‘49-‘52), bubble (‘95-‘99), always ended (’46, ’53, ’00) with bout of volatility; stagflation (‘71-‘74 & ‘77-‘80) drove gold streaks which ended with bout of bond vol (up in ’74 & ’80).. “sleep like a baby” 25/25/25/25 stock/bonds/cash/commodity portfolio tracking 26% YTD, best year since ‘33 & 3rd largest outperformance vs 60/40 past century (bar ’46 & ‘73 - Chart 5); 25/25/25/25 portfolio obvs not for all, but returns force allocators to raise low exposure to commodities...buy natural resources"

Defensive economic strength

Scotiabank strategist Hugo Ste-Marie argues that strong global economic data is deceiving,

“April Manufacturing PMIs Surprisingly Strong… But For the Wrong Reasons Despite much higher oil prices and some supply-chain disruptions, global manufacturing activity has rebounded briskly in April. As illustrated in our Chart of the Day, April preliminary manufacturing PMIs from Japan to Europe to the US have been surprisingly robust, all posting monthly gains and exceeding consensus forecasts. While rising PMIs is good news, the increase in output, new orders and delivery time components are all for the wrong reasons. In Japan, Europe and US for instance, S&P reported that higher new orders/higher output was in part due to companies trying to front-run expected price increases and/or building safety stock amid supply‑chain uncertainty and shipping disruptions. Bottom-line: Across the U.S., Europe, and Japan, April manufacturing strength reflects defensive behavior (inventory building, supply fears) more than a broad, sustainable upswing in final demand. If oil prices were to rise even more and the Strait of Hormuz stays closed much longer, we could start to see more macro weakness – but we’re not there yet"

Sustainable strength

RBC Capital Markets analyst Sara Mahaffy reports that although sustainable investing themes have underperformed so far in 2026 (this always happens when crude is rallying) there are pockets of strength,

“Most of the bigger AUM thematic categories saw outflows in 2025 which have continued in 2026. Flows for Impact, Water, and Environmental Solutions funds have been negative for several months. Climate Transition funds generally saw inflows in 2024 and 2025, however, they’ve eased back meaningfully in recent months. Health & Wellbeing flows have also turned negative again. Clean Energy has been the key bright spot – flows turned positive last year and have continued to accelerate in 2026. They remain below recent highs”

The analyst cites what she calls grid solutions - support for power grids must often associated with AI power demand - as the top performing sub theme despite marginal underperformance by nuclear power-related companies.

U.S. large cap stocks widely held by sustainable investment funds that are outperforming this year include Trane Technologies, Linde, Nextera Energy, Deere & Co., Equinix, Applied Materials, and Gilead Sciences.

Small and mid cap sustainable fund holdings performing well include Nextpower, Clean Harbors, Darling Ingredients, HA Sustainable Infrastructure Capital Inc. and F5.

Bluesky post of the day

Diversion

“This guy listened to every #1 hit since 1958 and crunched the data. Here’s what he learned” - A Journal of Musical Things