Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO economist Doug Porter seems surprised at the resilience of the loonie in light of crude prices,
“A popular question in recent days is “how is the Canadian dollar hanging in there, given these low oil prices?” First, some stabilization in oil has certainly helped, with WTI poking back above $20 on Monday (and WCS climbing above $16). But, even with that comeback, one can make a compelling case that the loonie is still over-valued at current levels. The bigger driver for the currency has been the general recovery in risk assets overall from the March lows. As the chart displays, the Canadian dollar has (along with so many other financial variables) followed equities to a “T” through much of this episode. Over the past few weeks, weak oil has indeed capped the currency’s comeback. This is not a call on equities, per se, but we remain cautious on the loonie in the months ahead.”
On April 21, I noted that the CAD had diverged from crude and was tracking copper prices. Column here
“@SBarlow_ROB BMO: "Canadian Dollar Holds In…How? " – (research excerpt) Twitter
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Citi quantitative strategist Hong Li’s research report “Massive factor volatility and macro risk loom large for all investors” sounded a distinctly nervous tone,
“Low Vol (Low Beta) remains the most crowded trade despite heavy losses last month, with still asymmetric downside risk… the equity market has been closely tracking macro indicators such as oil prices. However, in the last two weeks, the equity market rotation has started to diverge from major macro factors, suggesting that the rebound in the equity market and Value lacked support from other asset classes and may not be sustainable “
In short, stock prices are not following the global economic data anymore, and risks of a correction are rising in his opinion.
“@SBarlow_ROB C: "the equity market rotation has started to diverge from major macro factors, suggesting that the rebound in the equity market and Value lacked support from other asset classes and may not be sustainable “ – (research excerpt) Twitter
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Also from Citi, strategist Chris Montagu updated his list of top picks among global stocks. His model is equally weighted to relative value – price to earnings and price to book ratios relative to theoretical fair value – and price momentum.
Globally, the top 10 picks by sector are Nippon Telegraph and Telephone, Porsche AML Holdings Pref, British American Tobacco , Inpex, Credit Saison, Novo Nordisk, Obayashi, Fujifilm Holdings, Fortesque Metals and Electric Power Development.
More importantly for domestic investors, Bank of Nova Scotia and Bank of Montreal are new additions to the top decile of world’s most attractive stocks according to Mr. Montagu’s process. The other stocks reaching top decile include Astrazeneca , Aia Group, Reckitt Benckiser Group, Tokio Marine Holdings, Tesco, Mitsubishi Electric, Panasonic and Vestas Wind Systems.
“@SBarlow_ROB C: World radar top (and worst) picks” – (tables) Twitter
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Newsletter: “Bankruptcies will spread exponentially too” – Globe Investor
Diversion: “Pulling off a bureaucratic miracle: How the CERB got done’ – Maclean’s
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