Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
I have a story today suggesting that the inflation trade – weak bond prices, higher yields and base metals strength – was overdone and a retrace was likely in the very short term. Conveniently for me, this seems to be the case this morning, as the bleeding has stopped in bond markets and copper prices are weaker.
Bond yields might be a bit lower this morning, but there's no doubt that the bond market sell-off has caused a lot of pain for allegedly safe income based equity sectors in the past week.
Canadian utility stocks – the poster children for boring investor cash collection - have dropped a shocking 6.8 per cent since November eighth. Telecom stocks are lower by 4.1 per cent, consumer staples by 4.8 per cent and the S&P/TSX Real Estate Index is down 3.5 per cent. No income-generating sector was safe.
As for the extent of inflation pressures in 2017 I have no guess yet. We've had many false alarms before. The post-election period has provided, however, a painful lesson as to what's in store for income investors if inflation pressures continue.
"@SBarlow_ROB TSX utilities stocks down 6.8% since Tuesday. " – (table) Twitter
"Fidelity's $100 Billion Manager Says Rate Spike May Be Overdone" – Bloomberg
"Dollar, copper retreat, bonds in favor as Trump rally pauses" – Reuters
"Canadian REITs are at risk to falling prices under a Trump Administration, analysts say" – Financial Post
"Bond rout eases as 'Trumpflation' trade loses steam" – Financial Times
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Bespoke Investment's George Pearkes tweeted an interesting chart that I think provides a good way for investors to follow the "Fortress America" anti-trade market trend. It divides the Russell 2000 small cap ETF by the ishares Emerging Markets Equity ETF.
"@pearkes check out the IWM/EEM relative total return performance here" – (chart) Twitter
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Crude prices are sharply higher this morning, as much as 3 per cent. I suspect this is a technical rally in response to the big drop in WTI because the newsflow regarding future oil supply is not bullish at all.
"Oil Rebounds From 8-Week Low as OPEC Said to Work to Secure Deal' – Bloomberg
"Oil prices jump 3 percent on hopes of OPEC output cut" – Reuters
"BP CEO Sees Oil Market 'Pretty Pessimistic' About OPEC Cuts" – Bloomberg
"@chris1reuters World #oil stocks will rise by 400,000 barrels every day throughout 2017 - even with an #OPEC deal, says @tchiling @BNPParibas " – (chart) Twitter
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Tweet of the Day: "@ReformedBroker "I woke up with a Janet Yellen portfolio in a Donald Trump market." - Eric Peters " – Twitter
Diversion: Michael Lewis, arguably the most prominent financial writer there is, is set to publish a new book based on Daniel "Thinking Fast and Slow" Kahneman and Amos Tversky. Vanity Fair has an excerpt,
"How two trailblazing psychologists turned the world of decision science upside down" – Vanity Fair
Scott Barlow