Daily roundup of research and analysis from the The Globe and Mail’s market strategist Scott Barlow
Morgan Stanley strategist Boris Lerner published a 30-page report Friday with a number of useful market facts for investors,
“Currently, Low Vol is the most crowded factor while Size is the least crowded. 6 out of 11 sectors saw an increase in shorting activity with Technology being the most shorted sector, and Discretionary and Utilities, the least shorted sectors … Market concentration, as measured by the market cap weight of the top 5 stocks in the S&P 500 index, edged lower to 21.7%. It’s off from the August 2020 peak of 24.5%, but is still high relative to history and well above the two prior peaks of 18.3% in January 1983 and 18.2% in March 2000 … Analysts earnings estimates have been trending upward, on the back of a positive earnings season, reflecting a more bullish view on an economic recovery. Estimates have increased in majority sectors, except Real Estate and Utilities. Compared to the prior year estimates, Financial analysts are the most bullish while Utilities analysts are the most bearish … "
Mr. Lerner provided a list of U.S. stocks with the biggest jump in forward earnings estimates. Energy stocks dominate the top of the list with Devon Energy Corp., Hess Corp., Marathon Oil Corp., and Apache Corp. at the top.
Other prominent names with positive estimate changes include Lyondellbasell Industries NV, Hologic Inc., Nucor Corp. and Lumen Technologies Inc.
" @SBarlow_ROB MS: U.S. stocks with most positive EPS revisions” – (table) Twitter
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Nomura strategist Masanari Takada follows the most aggressive algorithm-based funds. He sees more volatility ahead, but only in the short term,
“It seems unlikely that the current risk-off phase is of the ‘bad’ kind, and we do not think this is the time to be looking to withdraw from investments in risk assets. However, we do see a risk that CTAs’ [commodity trading advisors] loss-cutting selling of major equity index futures in Japan, the US, and China will gather steam next week. We think equity markets may be sent into a deeper dip, even if only temporarily… Bond investors appear to be alone in their bullishness, and equity investors are suffering the consequences … US stock market sentiment has not actually deteriorated all that much. When contrasted with the market shake-up led by individual names in late January and the rout triggered by the spike in yields in late February, our sentiment gauge this time around makes it look as though investors are getting used to the turbulence… we are not seeing anything like the sort of irregular departure that would suggest that investors are expecting a downshift in fundamentals "
“@SBarlow_ROB Nomura’s Takada: Turbulence ahead but it’s not the big one” – (research excerpt) Twitter
See also: " It’s Not Different This Time” – Irrelevant Investor
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The Financial Times’ Michael Mackenzie details the growing unease among fixed income investors,
“‘Bonds are not the place to be these days,’ Warren Buffett, the Berkshire Hathaway chief told shareholders in his latest annual letter last month … The improving macro backdrop presents bond investors with little choice other than to upgrade expectations for both growth and inflation and reduce their exposure to the risk of a pronounced rise in market interest rates this year. Despite their recent abrupt climb, 10-year benchmarks still remain at historically low levels, a point of vulnerability not lost on investors. ‘The fear level is high among financial advisers and portfolio managers with rates seen heading higher,’ said Jason Bloom, head of fixed income and alternatives strategies for ETFs at Invesco.”
I’m following the performance of the biggest U.S. bond ETFs for signs of a mass re-allocation into equities that will cause a spike in bond yields.
“Fears rise among bond investors as Buffett warns on outlook” – Financial Times (paywall)
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Diversion: “10 Female Musicians You Should Know! (2021)” – Rick Beato (video)
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