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Trump will offer market guidance, or else

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

If U.S. president Donald Trump doesn't offer positive guidance on fiscal spending in Tuesday night's address to a joint session of Congress, markets could very well go south in a hurry.

Bond markets have unwound a lot of the 'Trump trade' that predicted higher growth and inflation and others, like cyclical stocks versus defensive stocks, have rolled over a bit and are treading water in search of direction.

There are no shortage of warnings about a market correction around as both Tim Shufelt and Mike Babad noted in the Report on Business.

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I half-jokingly wrote after the U.S. election that "a cynical investor might consider defense stocks" and these cynics would have made a nice profit. Most stocks in the sector are higher by more than 25 per cent post-election and reports indicate that the president will announce an extra $54-billion (U.S.) in defense spending tonight.

"Trillions of Dollars Are at Stake When Trump Speaks to Congress" – Bloomberg
"Trump looks for reset with speech to Congress" – Reuters
"Calls for a market correction are getting louder by the day" – Shufelt, Report on Business
"How bloody could a stock market correction be?" – Babad, Report on Business
"@SBarlow_ROB GS' Kostin "the distribution of market outcomes appears asymmetrical." – (Goldman Sachs research excerpt) Twitter

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Domestic banks continue to defy the naysayers by reporting extremely strong profits, this time it's Bank of Montreal and Bank of Nova Scotia, the latter of whom also raised their dividend.

"Scotiabank keeps banks' dividend party on a roll as profit climbs" – Report on Business
"BMO tops forecasts; announces share buyback" – Report on Business

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Fear of technology has been culturally evident since at least 1927 when the movie Metropolis was released, but, even so, I admit to being a bit uneasy with developments in robotics and artificial intelligence (AI).

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Boston Scientific released a video of a new, alarmingly agile robot recently, and I've also been reading about a new package of software and sensors that allows management to monitor every physical move and keystroke their employees make. Clearly there are positive developments – AI has proven more effective than doctors at diagnosing breast cancer by reading MRIs and ultrasounds, but still, it's all a bit disquieting.

"Introducing [Boston Scientific's] Handle" – Youtube
"Your Cubicle Has Ears—and Eyes, and a Brain" – M.I.T. Technology Review
"The Dawn of the Age of Artificial Intelligence" – The Atlantic (2014)
"Cognitive technologies: Real opportunities for business" – Deloitte Review

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Tweet of the Day: "@JKempEnergy U.S. GENERATION MIX changing rapidly with older less-efficient coal plants being replaced by new gas and renewables: eia.gov/todayinenergy/… " – (chart) Twitter

Diversion: CRISPR, a device for manipulating human genes, is another case where there is a ton of excitement regarding medical applications, but also some scary ethical/social engineering questions,

"Startup Aims to Treat Muscular Dystrophy with CRISPR" – M.I.T. Technology Review

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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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