A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Canadian GDP results for January were reported Friday morning at 8:30 a.m. ET. Month-over-month growth was 0.3 per cent when 0.1 per cent was expected by economists.
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Citi global economists and strategists have come out and actually predicted what investors have been concerned about for the past six months, a global recession (my emphasis),
“From goldilocks, via a brief reflation, we are heading to stagnation and then, probably, recession. European and Asian weakness is consensus. But US lead indicators suggest more downside delta to come in the US. Citi curve models put the probability of a US recession in a year at 37% but have never reached more than 50% even when recessions occur. So that’s 75% adjusted. As, and if, the curve inverts more, probabilities rise exponentially anyway. Hence we think the risks around Citi economic forecasts are solidly to the downside, and advise investors to prepare for recession.”
“@SBarlow_ROB More on Citi's recession call” – (research excerpt) Twitter
Counterpoint: “Why Are Economists So Bad at Forecasting Recessions?” – Businessweek
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Citi global strategist Robert Buckland provided more details on the timing, and why they are short –term bullish,
“ Major US EPS contractions and bear markets began 18-24 months after the last three yield curve inversions. But beforehand, US equities rose an average 32% (+16% post May 89, +58% post Sep 98, +22% post Jan 2006). Yield Curve Not Working Elsewhere: The yield curve stopped being a useful lead indicator of the Japanese stock market in the 1990s. It has not helped to predict European EPS contractions in this cycle.”
“@SBarlow_ROB More C:” – (research excerpt) Twitter
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Merrill Lynch quantitative strategist Savita Subramanian is my go-to source for U.S. earnings analysis and forecasting. Ms. Subramanian notes that profit guidance has improved a bit recently, but it’s still weak and implies weaker equity markets,
“The three-month earnings estimate revision ratio (ERR) ticked up in March for the first time in six months, to 0.62 from 0.54 (its highest level since December). The ratio still indicates more cuts than raises to estimates, but at a slowing pace. The ratio remains below average (avg = 0.87), which has historically suggested weaker near-term returns. The more volatile one-month ERR also ticked up to 0.79 from 0.70, a five-month high. Estimate cuts also decelerated within small and mid caps last month, but less so, where both the ERR and the guidance ratio remain weaker down the cap spectrum.”
“@SBarlow_ROB ML: Earnings revisions tick higher, still bad” – (research excerpt) Twitter
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A Bloomberg report on Canadian money laundering is spreading like wildfire in the investing quarters of social media this morning,
“Prime Minister Justin Trudeau’s government is now acknowledging the problem and pledging to try and fix it. “This issue was identified as a real priority -- it has become a priority for my government,” Bill Blair, Canada’s federal minister for organized crime reduction, said Wednesday in Victoria, the capital of British Columbia. “We recognize and acknowledge the impact that this criminal activity -- money laundering -- has had on British Columbia, on the affordability of housing, and on the integrity of our financial institutions.” … [British Columbia] has earned “an international reputation for being a center for money laundering,” Eby said. “What we need to do is close the loopholes and ensure that we’re addressing the systematic issues that are leading to a lack of prosecution, a lack of convictions.”
“Canada has a money laundering problem it's pledging to fix” – BNN Bloomberg
“Housing affordability at ‘crisis levels’ in Vancouver and Toronto, with Montreal pushing the limits” – Report on Business
“Examining the Exodus out of Toronto” – Mike Moffatt
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Tweet of the Day:
Diversion: “Must listen: Michael Mauboussin on valuation” – (podcast) FT Alphaville