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A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Bank of America is warning that another rout in bond markets could be ahead,

"Soaring stocks, rallies in the financial sector, tightening credit spreads, and a drop in volatility -- all accompanied by a decline in real interest rates. That's the story of the market since the last Federal Reserve hike in December... Strategists at Bank of America Merrill Lynch are left with an unwelcome feeling of deja vu. The last time we saw this confluence of events was right before bond-market routs in 2013 and 2015, the so-called taper tantrum and bund tantrum."

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A bond sell-off and a spike in yields would be a major problem for dividend and income investors, but this might also be a buying opportunity, depending on inflation pressures.

"BofA Urges Caution as Warning Signs Point to a Bond-Market Tantrum" – Kawa, Bloomberg
Related: "Most Overcrowded U.S. Futures Trade Gets More Congested: Chart" – Bloomberg
"Three Decades of Bond-Market History Sow Doubt on Reflation Bets" – Bloomberg


Bearish headlines get more attention, so I could just note that ABN Amro forecasts $30 oil if OPEC doesn't cut production further and that Merrill Lynch has reduced its average crude price prediction between now and 2022 to $50-$70 (from $55-$75). But, it's also the case that Citi has just increased its short-term oil price target to $70 per barrel so investors can feel free to believe whichever number suits their prior beliefs.

For what it's worth, my lightly held thesis on oil is weaker in the near term because of rampant speculative behaviour in futures markets, but a recovery late in 2017 as global supply and demand comes closer to balance and global inventories start to decline.

"Crude Oil Could Plunge to as Low as $30 a Barrel" – Bloomberg
"@chris1reuters Merrill Lynch @BofAML cuts its forecast for average #Brent crude #oil prices until 2022 to $50-$70 from $55-$75 " – Twitter
#OPEC #WTI #gas #OOTT #shale
"Citi sees Brent oil at $70 a barrel by end of 2017" – Marketwatch
"Oil Slips From One-Week High as Focus Returns to OPEC Cuts" – Bloomberg
"Goldman says global crude stocks likely to keep falling" – Reuters


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Writing for Maclean's, University of Calgary economist Trevor Tombe argues that anti-carbon tax forces are over-estimating its negative effects,

"The economic cost of carbon pricing is likely minor. Modelling results from Canada's EcoFiscal Commission suggests modest reductions in economic growth rates — on the order of hundredths of a percent, depending on details of design. The effect on costs, and therefore trade, are also (for the most part) minor. There are exceptions that I will describe below, but targeted measures can substantially mitigate these issues."

"Why concerns over carbon pricing are misplaced" – Tombe, Macleans


Tweet of the Day: "@Neuro_Skeptic Get that crystal ball away from me: up to 90% of people would not want to know about upcoming negative events ' – Twitter

Diversion: "Chill With The "Journalists Are Heroes" Thing" – (warning: some NSFW language) Deadspin

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More


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