A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Savita Subramanian is the chief quantitative strategist at B of A Securities, the brokerage firm formerly known as Merrill Lynch. In a mammoth 93-page report published January 6, Ms. Subramanian recommended a ‘YARP’ – yield at a reasonable price – strategy for investors in U.S. equities,
“ We have long maintained a preference for dividend growth over high dividend yield. But with bonds in negative yield territory and central bank easing, a yield grab will likely persist. While we continue to recommend dividend growth stocks for long-term investors, stocks with the highest dividend yields could continue to attract a disproportionate amount of assets. Thus, we target stocks with higher dividend yields but look for “Yield at a Reasonable Price” (YARP). Favored sectors generally offer a balance between yield, relative valuations, and above-market dividend growth”
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The attached graphic highlighted U.S. financials and utilities as the best sectors to find YARP stocks.
“@SBarlow_ROB ML: ‘Yield at a Reasonable Price’ strategy (U.S.)” – (research excerpt, chart) Twitter
Financial Times oil expert David Sheppard listed five reasons crude prices failed to soar on Middle East tensions. The five, in order, are investors expected a quick de-escalation, the passage of oil tankers seems safe so far, OPEC has scope to increase supplies, prices had already rallied, and higher prices would just lead to more global production which would pushing prices right back down. The explanation under the final category was most relevant,
In the back of every oil trader’s mind is this simple calculation, which has arguably become even more germane with the rise of the US shale industry. While shale’s supercharged growth is projected to slow this year, as companies prioritise generating cash over boosting drilling, stronger oil prices may well bring a swift response from the shale industry to increase output. That is likely to damp enthusiasm among oil traders. “Oversupply concerns will continue to stalk the energy complex,” said Stephen Brennock at PVM, an oil brokerage”
“Five reasons oil prices failed to soar on US-Iran tensions” – Financial Times (paywall)
Nomura strategist Masanari Takada follows the trades of the world’s most speculative and aggressive hedge funds. He seemed bemused about the market’s rapid turnaround Wednesday in a research report released overnight,
“It is quite rare for a piece of research to have a shelf life as short as that of yesterday’s edition of this memo… The risk-off mood that struck during trading hours in Tokyo came and went in short order, passing like a freak thunderstorm. Markets in Europe and the US then proceeded to experience a relief rally across a broad range of asset classes … the ultra-short-term traders tracked by the SG Short Term Traders Index (NEIXSTTI), which typically have investment horizons of 10 days or less, had started off the year reducing their net exposure to US and European equities, but then appear to have piled into accumulating longs once the de-escalation of the Iran situation gave birth to a relief rally”
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“@SBarlow_ROB Nomura: “The risk-off mood that struck during trading hours in Tokyo came and went in short order, passing like a freak thunderstorm” – (research excerpt) Twitter
B of A analyst Gregory Francfort downgraded Restaurant Brands International, parent company of Tim Hortons, to underperform and slashed the price target by $$14 to $80. He writes,
“ We think Tim Hortons (TH) struggles will weigh on RBI until the brand is stabilized and the Dec 27 announcement of the departure of Tims president Alex Macedo suggests that may take longer than expected… Despite Tims representing just 20% of system sales, it is 49% of total EBITDA… We think Tim Hortons has lost share over the past several years in Canada to its two biggest competitors, Starbucks and McDonald’s. With Starbucks, strong Canadian store growth of 3%-4% has accelerated over the past two quarters to 5.9%, which may be contributing to a deceleration in recent sales growth at the market share leader Tims.”
“@SBarlow_ROB Tim Hortons parent co downgraded to Underperform at B of A Securities (ML)” – (research excerpt) Twitter
Newsletter: “ It’ll be either feast or famine for investors in 2020” – Globe Investor
Diversion: “ Inside the corrosive new generational blame game: The generational divide is society’s new battleground, pitting boomers against millennials and everyone in between. Who’s really to blame?” – Macleans
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Tweet of the Day: Tweet of the Day: “@SBarlow_ROB ML: [Elizabeth] Warren: Optics vs Reality” – Twitter
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
