Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Morgan Stanley chief U.S. equity strategist Michael Wilson’s Fresh Money Buy List of stocks continues to outperform the S&P 500,
“In a Trading Range...Offsetting forces mean we’re likely in a trading range of 5000-5500 (~18x-20x) for the S&P 500. On the positive side, the 90-day pause on reciprocal tariffs and further concessions over the weekend lessen the near-term probability of a recession. Perhaps most importantly, they demonstrate that the administration is willing to course adjust—an unknown dynamic for stocks just 1 week ago. On the negative side, the back and forth on policy is still likely to exacerbate uncertainty for businesses and consumers. Further, the Fed remains on the sidelines in terms of offering monetary policy support, and long-end rates have jumped over 60bps in a week. To the extent the shift in tariff policy was due to the move in back-end rates, we have yet to see the relief desired. Bottom line, the equity market will likely remain in a wide trading range with high volatility until we have more certainty on the depth of the growth slowdown and the timing of a recovery”
The stocks in Mr. Wilson’s Fresh Money Buy List have outperformed the S&P 500 by an average of 10.7 per cent since inclusion. The stocks on the defensively-oriented, concentrated list of U.S. companies are American Tower Corp., Centerpoint energy Inc., Coca-Cola Co., Colgate Palmolive Co., McDonald’s Corp., Northrup Grumman Corp., The Progressive Corp., Public Service Enterprise Group and Walmart Inc.
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JP Morgan strategist Mislav Matejka is really bearish,
“As of Friday’s close, we believe recession is at best half way priced. We note that in the past 5 downturns, S&P500 on average fell 37% peak to trough. Last 3 times, starting forward P/E was 19x, and trough P/E 12x. So far, from the February market peak to last Friday close, S&P500 is down 13%, and currently trades on 19x P/E. These are valuation levels seen at the start of a downturn, rather than at the end. 3. Even in light of the latest 90-day tariffs pause for non-retaliating countries and the electronics exemptions, given that SPX is now only 5% below the levels held on 2nd April, we struggle to see equities trading sustainably above the pre- “Liberation Day” levels. Simply, some of the damage to corporate and consumer confidence will stick given these wild gyrations. In any case, compared to the setup on 2ndApril, the 10% universal tariffs are still in effect, as well as additional China tariffs, which are much higher than most envisaged, and this is on top of the various retaliations. This is an already much worse backdrop than most expected at the start of the year, and relative to this, main global equity indices are down only single digits on the year. As the activity was already weakening ahead of “Liberation Day”, the market has likely not yet overreacted on the downside. 4. We continue to believe that we would be buyers of equities some time in 2H, but the current volatility is likely not done yet”
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RBC head of U.S. equity strategy believes U.S. equity returns are all about economic growth perceptions, as she outlines in a research report called A Box of (Potentially Bittersweet) Chocolates,
“The big things you need to know: First, the S&P 500 has attempted to stabilize after hitting the low end of the 2nd tier of fear on our drawdown framework. Current pricing is consistent with a growth scare, but if recession fears escalate there’s likely more downside in the index. Second, the downward revision process to 2025 bottom-up consensus EPS forecasts has gotten underway, a necessary step for the US equity market to form a durable bottom. Third, small business, consumer, and investor vibes continued to weaken last week, hitting extremes in a few instances that are worth taking note of from a contrarian perspective. Some indicators still have room to deteriorate, however. Fourth, Growth has started to outperform Value again within the Large Cap part of the US equity market. This seems fueled by the ratcheting down of domestic economic expectations, but may reverse if the rotation from US to Europe within equities resumes”
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Bluesky post of the day:
RENMAC: “.. Consumer sentiment is imploding. Importantly, consumers see a negative supply shock. Inflation expectations have jumped while employment expectations have plunged. Not great, Bob!”
— Carl Quintanilla (@carlquintanilla.bsky.social) April 12, 2025 at 8:59 AM
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Diversion: “This study reveals the favourite songs of psychopaths” – A Journal of Musical Things