A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
I didn’t realize I had a firm market view until yesterday, when I was shocked by the extent of the equity rally.
U.S. airlines and technology hardware companies dependent on Asian supply chains were among the top performers, indicating the market believes the risks from the coronavirus are falling.
Nomura Strategist Takada believes aggressive hedge funds were chasing the market Tuesday,
“We believe that yesterday’s global risk rally can be attributed to active stock market investors buying the market up in contrarian fashion just as hedge funds in general had started finishing the job of trimming their net long positions. We note in particular that CTAs appear to have been forced into doing an about-face and chasing the market up again as a result of the S&P 500 breaking back above the strategically significant line at around 3,270… the rebound in sentiment off its recent pessimism may still have further to go.”
“@SBarlow_ROB Nomura's Takada; " the rebound in sentiment off its recent pessimism may still have further to go" – (research excerpt) Twitter
“@jjeswani CHINESE TV: RESEARCH TEAM AT ZHEJIANG UNIVERSITY HAS FOUND AN EFFECTIVE DRUG TO TREAT PEOPLE WITH THE NEW CORONA VIRUS” – Twitter
“ Coronavirus: 'Significant breakthrough' in race for vaccine made by UK scientists” – Sky News
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BofA Securities (formerly Merrill Lynch) analyst Ebrahim Poonawala is “uncomfortably bullish” on Canadian bank stocks,
“2020 outlook: Uncomfortably bullish. We believe that the group is positioned for improved performance in 2020 as margin and credit headwinds to EPS growth fade, while macro factors become less of an overhang. That said, we expect the first half of the year to be a “show-me” story for the banks, as investors look to gain comfort that the uptick in credit metrics witnessed last year was a mere normalization (we are in this camp) vs. a start of a more material worsening in credit trends. All of this of course assumes that the economic and market impact tied to the coronavirus proves temporary. Our forecast implies modest acceleration in EPS growth to 5% YoY in ‘21 vs. 3% in ‘20. If our forecast holds, then the second half of the year should be rewarding for shareholders.”
TD bank and Royal Bank are the analysts’ top picks in the sector
“ @SBarlow_ROB BoA: "uncomfortably bullish" on Canadian banks” – (research excerpt) Twitter
Counterpoint: Canaccord downgrades Canadian banks amid ‘toxic mix’ of risks” – BNN Bloomberg
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CNBC’s Jim Cramer has a history of bold statements that keep his television audience entertained.
Few have been more definitive that his comments on energy stocks earlier in the week,
“Larry Fink, the CEO of BlackRock (BLK) , one of the largest money managers on Earth, has said that these concerns are now paramount in stock selection. He’s got huge holdings in oil and gas. He’s talking about divesting any company that makes more than 25% of its revenue from thermal coal, a big greenhouse gas emitter. I don’t think people realized the seriousness of this pronouncement. No one in this investment firmament carries as much sway as Larry Fink, including the Oracle of Omaha, Warren Buffett.
“Lots of oil execs are unhappy with my stance. But remember what I am: I am not about making friends, I am about making money. And I don’t think I can help you make money in the oil and gas stocks anymore. They seem like a slowly melting ice cube, a wasting asset that will have down revenues unless oil jumps higher and stays higher. After the events I just outlined, I don’t expect that to happen.”
“Jim Cramer: Once Again, Why Fossil Fuels Are on the Wrong Side of History” – Real Money
“Oil jumps 3% on reports of effective coronavirus drug” – Reuters
“Oil flips into contango, indicating months of surplus” – Reuters
“Electric dream: Britain to ban new petrol and hybrid cars from 2035” –Reuters
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Diversion: “Spotify is buying Bill Simmons’ The Ringer to boost its podcast business” – Vox
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