Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Investment strategist Michael Hartnett’s weekly Flow Show report is scattered, blunt and interesting as usual (my emphasis) ,
“Zeitgeist: “what could be more 2023 than a 5% US GDP print being greeted by most recessionary daily tape since [Silicon Valley Bank].“ Tale of the Tape: 66% is market probability last Fed rate hike was July 26th; since July 26th: oil 6%, US$ 5%, S&P -9%, Nasdaq -11%, UST 30-year -16% … Bond bubble has popped; post-bubble price action sideways, in big, fat trading range – see Japan ‘89, internet ‘00, homebuilders ‘05, China ‘07; there will be rallies but likely no secular bond bull till D.C. serious about fiscal discipline … We think ‘hard landing’ probability higher than consensus 30%, and say ‘sell the last rate hike’ in inflationary backdrop (as higher-for-longer rates required to tame inflation)”.
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Scotiabank analyst Ben Isaacson described Ford Motor Co.’s response to slow electric vehicle demand,
“Ford will postpone $12B of EV investments, as North American buyers have largely become unwilling to pay a premium for EVs over traditional ICEs. This follows GM’s decision to scrap a $5B plan to co-develop affordable (<$30k) EVs with Honda. In our view, these moves, coupled with Chevron and Exxon both doubling down on oil recently will likely put pressure on governments to ease their EV transitions mandates, unless of course governments are willing to double down their economic incentives…”
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The research team at RB Advisors forwarded a list of facts from founder Richard Bernstein’s quarterly outlook webinar,
“Companies that grew the most: 130 companies in the US have growth earnings 25% or more in the last 4 quarters. How many of the Mag7 [Magnificent 7 large cap tech stocks] pass that screen? 1 … Investing at the peak of a hype cycle can have serious long-term effects. Did you know that energy has outperformed technology over the last 25 years? … We have been in a global profits recession but they are going to accelerate; global profitability is getting better … Where is the opportunity? You want the stocks that are causing interest rates to go up. We’ve been adding cyclicality to our portfolios. OW [ overweight] industrials, energy, healthcare, consumer staples”
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Canadian investors will have to be careful about the tax implications, but BMO chief strategist Brian Belski believes it’s time to buy oversold U.S. dividend stocks,
“The relative performance of the highest-yielding S&P 500 stocks has been under immense pressure in recent months as investors have likely shunned this area in response to higher-for-longer interest rate worries. However, we believe this indiscriminate selling has gone a bit too far and that a rebound is likely in store for these stocks in the coming months. From our perspective, the relationship between these stocks and interest rates is a little more nuanced, than the “low is good, high is bad” mantra that has overtaken them this year. In addition, the fundamental underpinnings of the group appear mismatched with performance trends. Thus, we believe it could be an opportune time for investors to consider adding exposure to high dividend yield stocks within portfolios.”
The report includes a list of high yield stocks that are buy-rated at BMO. Those likely to be of interest to Canadian investors include AbbVie Inc., American Tower, Bristol Myers Squibb Co [disclosure: I own a position in BMY], FMC Corp., Gilead Sciences, Morgan Stanley, and Pfizer.
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Diversion: Why read books when you can use chatbots to talk to them instead – Wired
