A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Bank of Montreal economists note that a reliable recession indicator for the domestic economy has been triggered,
“For the first time in more than a decade, we have a full-on yield curve inversion — the 10-year GoC yield now sits at 1.73%, breaking below the Bank of Canada’s overnight rate of 1.75%. While Canada’s yield curve has sent many false positive signals over the decades, most of those were in the bad old days of the 1980s and 1990s … That is clearly not the case here. Meanwhile, the 5-year bond yield has absolutely plummeted … The market is now pricing in almost a 50% chance of a BoC rate cut at some point in 2019—again, not exactly a vote of confidence in the economic outlook. Despite these obvious warning signals, we would revert to the initial contention that the underlying backdrop just doesn’t point to such dire circumstances.”
The amount of equivocation in the wording here implies that it’s not currently easy to put the recession indicator in context.
“ @SBarlow_ROB BMO on Canadian yield curve inversion” – (research excerpt) Twitter
“@JKempEnergy US TREASURY YIELD CURVE is still inching towards full inversion” - (chart) Twitter
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Fund management behemoth Fidelity doesn’t have a lot of confidence in the loonie,
“The Canadian dollar may sink back to its record low of 62 U.S. cents (C$1.61) as the country retrenches from a consumer-spending boom into the face of a slowing global economy, said David Wolf at Fidelity Investments… the nation may already be in recession after growing at an annualized pace of just 0.4 percent in the fourth quarter and a pretty “soggy” start to the year, said Wolf, part of the asset allocation team at Fidelity Investments Canada … He stressed his views were his own, not the firm’s.”
Mr. Wolf is a former economist at Merrill Lynch and the Bank of Canada.
“Fidelity’s Wolf Sees Loonie Testing 62-Cent Low Amid Slowing Economy” – Bloomberg
“‘When it comes to the loonie, sell strength at every opportunity” – Babad, Report on Business
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Goldman Sachs strategist David Kostin has released a list of 30 stock picks in his recent presentation “Where to Invest Now?.” The selections emphasize revenue growth to offset potential economic weakness, low labour costs to avoid the negative effects of wage inflation, low operating leverage, and dividend growth.
“@SBarlow_ROB 30 stocks from GS's Kostin” – (table) Twitter
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Tweet of the day:
Diversion: “ Why Bezos and Microsoft are betting on this $10 trillion energy fix for the planet” – CNBC