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Prominent strategist is convinced: ‘Buy the dip’

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

The oil price halted its slide Tuesday in anticipation of the Department of Energy's weekly report on storage Wednesday, which is expected to show further declines in crude inventories. Details on this and related energy news in the links below.

"Oil Halts Slide Near $47 as U.S. Stockpiles Seen Extending Drop" – Bloomberg

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"Waiting for a breakout in crude prices? Here are three charts to watch" – Barlow, Inside the Market

"Will The U.S. Cut Oil Production?" – Youtube, Wood Mackenzie

"Lithium Is Getting Harder to Extract" – Bloomberg

"@IEA Electricity generation from #gas matched generation from #coal in the OECD for the first time ever in 2016 bit.ly/2vRorqv " – (chart) Twitter

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I'm watching corporate bond spreads closely for signs of impending global equity sell-offs, and this report was not encouraging in that regard.

"Investors have piled into top-rated junk notes at a disproportionate pace this year, leaving those notes paying near the lowest extra yield compared with the lowest-ranked investment-grade debt since before the credit crisis…"

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"Western Asset Finds Bond Wins in Singles" – Bloomberg

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Morgan Stanley is convinced recent market weakness is a buying opportunity.

"'Buy the dip.' This is the message from Morgan Stanley equity strategist Michael Wilson .. 'We think this was simply a re-test of the prior week's correction… We are focused on what actually drives stocks and our bull market check list remains intact: Economic and earnings growth, interest rates, inflation, Fed/central banks, credit markets, valuation and technicals.'"

"'Buy the dip': What Wall Street's most bullish strategist is telling clients" – Yahoo! Finance

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Ray Dalio, founder of Bridgewater Associates and arguably the most revered hedge fund manager in North America, is reducing portfolio risk in anticipation of weak markets.

"'It seems to me that we are now economically and socially divided and burdened in ways that are broadly analogous to 1937,' Dalio wrote. 'During such times conflicts [both internal and external] increase, populism emerges, democracies are threatened and wars can occur. I can't say how bad this time around will get. I'm watching how conflict is being handled as a guide, and I'm not encouraged.'

There are two disastrous precedents for the years ahead. In 1937, U.S. officials withdrew monetary stimulus in the belief that the economy had sufficiently recovered from the Great Depression. The equity market got crushed shortly thereafter. The other precedent is the 'post-1990 Japan Scenario' of decades long, recession-ridden economic malaise. Mr. Dalio is clearly concerned about the 1937 option."

"Ray Dalio: US most divided socially and economically since 1937" – CNBC

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Tweet of the Day: The sequel to the classic sci-fi film Blade Runner, directed by Canadian Denis Villeneuve is close to release, "@carlquintanilla The latest trailer for @bladerunner is here: $TWX youtu.be/685S6n6sQrw?a " – Twitter

Diversion: "Petrified Forest: Fear, says Lewis Lapham, is America's top-selling consumer product." – Lapham's Quarterly

Video: Carrick Talks Money: Is Canada returning to an 'inflation nation'?
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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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