Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Morgan Stanley strategist Jonathan Garner assessed the world’s largest market sectors in search of those where globalization (multi-country supply chains and end markets) can continue and those where supply chains are likely to be disrupted. This is a key consideration in that globalization has been a main driver of higher profit margins for multi-national firms. Mr. Garner writes,
“The ‘Washington Consensus’, the liberal international economic order that has governed post-Cold War international commerce, is gravitating toward obsolescence. In its place, a multipolar world is emerging, with competing economic standards and practices emanating from the US, China and Europe… ‘Decoupling’ or ‘deglobalization’ is often invoked as a framework to address this dynamic, but we think it oversimplifies the problem of multipolarity, a state where globalization can continue in key sectors of international commerce – even sensitive technology areas – with the right rules-based approach.'
Mr. Garner lists autos, real estate, and semiconductors as sectors where globalization will slow but not stop. Among the sectors least affected are beverages, chemicals, soft commodities and agriculture, and media.
“@SBarlow_ROB MS: sector sensitivity to de-globalization’ – (graphic) Twitter
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Citi U.S. equity strategist Tobias Levkovich publishes “Monday Musings” late in the day every Friday and this week’s version is as informative and useful for investors as usual (my emphasis),
“Momentum has been the most important driver for stock prices, outpacing min-volatility or high quality… Given concerns about cyclical recovery timing and potentially longer-term damage to segments of the economy (i.e., travel, lodging, leisure), there is evident concentration of US and foreign investors into select areas, culminating of late with some powerful IPO pops. In many respects, this behavior suggests a so-called blow-off top, not the beginning of a new bull run… “Dr. Copper” is more of a China-driven index at this juncture and has not been associated with US trends for a good while.'
‘Blow-off top’ refers to the final, most frenzied stage of a bull market just before the rally ends.
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Bank of America’s weekly report on client investment flows included some trenchant observations by the company’s chief investment strategist Michael Hartnett (my emphasis),
“1999-lite is the unintended (or perhaps intended) consequence: successful central bank repression of rates, spreads, volatility begets speculative froth elsewhere in the financial system… Bears, bubbles & central banks: and it is central banks, not bearish investors that end bubbles; and the price of money is at all-time lows (e.g. lowest US bond yields in history of the Republic); the remarkable rally in credit and stocks may be closer to an end than a beginning but central banks say “sell” excesses in bonds & credit can foster further excesses in growth stocks et al… gold, credit, tech continue to monopolize YTD client buying; gold inflows 16 of past 17 weeks, another week with big inflows across [investment grade corporate/high yield corporate and emerging market bonds] ($11.4bn), record 2-week inflow to tech funds ($4.9bn ).”
The ’1999-lite’ reference echoes Mr. Levkovich’s concerns about a blow-off top to some extent.
“@SBarlow_ROB BoA: “1999-lite is the unintended (or perhaps intended) consequence: successful central bank repression of rates, spreads, volatility begets speculative froth elsewhere” – (research excerpt) Twitter
Newsletter: “”The world’s wealthy hightail it out of equities, the gold ‘mini-portfolio’, and a compelling case for value stocks " – Globe Investor
Diversion: “These are Netflix’s 10 most popular original movies” – Bloomberg
(Somewhat shocking) Tweet of the Day: “@Callum_Thomas 9. Older folk dominating the market... Those aged 55+ owned 75% of US equities in 2020 That figure was 52% in 1990 Meanwhile the under-40′s held just 4%' – Twitter
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