Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO economist Robert Kavcic wonders about the government “guardrails” supporting domestic employment,
“Ottawa’s fiscal update outlined a set of ‘guardrails’ to help guide the timing of reduced stimulus spending, absent any objective fiscal anchor. But these guardrails, while sounding good in concept, still leave much open to interpretation: -We don’t know what levels of these indicators are being targeted. -If a return to pre-COVID levels is the objective, history has shown that it could take anywhere from just under 3 years (hours worked in the 2008 recession) to never at all (the unemployment level in all recent recessions). Which ones get more weight?”
“@SBarlow_ROB BMO: how strong are the guardrails supporting Canadian employment ?” – (research excerpt, chart) Twitter
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Citi strategist Chris Monatgu details the “remarkable” pivot to value stocks in November,
“The bid for Value was consistent across the globe but the absolute magnitude of performance was much larger in Europe. Again, in terms of history, it was the largest monthly performance of Value in the data that we have (back to early 1995), while for the US it was best since 2009 (and 2009 was the best month since 1995) … from the 9th of November, with the Pfizer vaccine announcement, the spread of returns between [value and growth] styles fanned out. For the US (and the global market in general), a similar profile can be seen as well except for the magnitude.”
“@SBarlow_ROB C: style performance for November’ – (table) Twitter
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BofA Securities economist Carlos Capistran predicts a slow start to Canadian economic growth for 2021 but a strong rebound for the full year,
“We expect the economy to grow 5.0% in 2021 after falling 5.4% in 2020. Growth will initially be weak but it should gain strength as the year advances. The beginning of 2021 is likely to be slow as the increasing number of COVID-19 cases leads to targeted lockdowns on a regional basis, especially in urban zones, and because the US is likely to slow down at the turn of the year. But we expect growth to accelerate to sequential rates at or above 5% starting in 2Q as the roll out of a vaccine unlocks pent up demand in sectors such as accommodation and entertainment in anticipation of stronger demand”
“@SBarlow_ROB BoA on Canadian growth: “A large rebound in 2021 after a weak start” – (research excerpt) Twitter
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Scotiabank strategist Hugo Ste-Marie is worried markets are overheated but recommends investors add to cyclical market sectors on any weakness (my emphasis),
“We are constructive on the longer-term outlook. However, the massive run-up in stock prices has left sentiment on the high side. Our Panic-Euphoria indicator recently entered Euphoria land for the first time since the end of 2019. We would stay invested and add on pullback…. We are adding cyclical-value sectors, namely banks, energy, and base metals. Overall, the portfolio is OW [overweight] Financials, Industrials, Discretionary, and resources (Materials & Energy). We also maintain an OW positioning in Staples among the defensive sectors. Line-up: We are adding RY, CM, and BMO, swapping both QBR/b and CCA for RCI/b in Communications, increasing exposure to CNQ and SU in Energy, and trading FNV (gold) for HBM (base metals). Within Industrials, TRI is out and we are adding AC.”
“@SBarlow_ROB BNS: Add to these Canadian stocks on market weakness” – (research excerpt) Twitter
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Diversion: “Every Major [U.S.] Bank Has Now Ruled Out Funding Arctic Drilling” – Gizmodo
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