A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Merrill Lynch’s widely read monthly survey of global portfolio managers was published Tuesday.
Highlights include (my emphasis),
“We remain contrarian bullish as our Sept Fund Manager Survey (FMS) shows only modest improvement in risk appetite … only 1 in 5 FMS investors surveyed believe short term rates will go up (12 months ago just 1 in 10 thought they were going down) … trade war top FMS “tail risk” 17 of past 19 months … fiscal and/or EPS inflection needed for FMS investors to buy value; note Sept FMS shows investors add longs in growth & defensive sectors despite survey period during second largest relative 5-day return for MSCI US Enhanced Value vs. US Growth in past 18-years … contrarians should be short US Treasuries (vs. stocks); long EUR/GBP vs. US$; long resources (energy & materials) vs. defensive bond proxies (staples & utilities)”
“@SBarlow_ROB ML Fund manager survey highlights” – (research excerpt) Twitter
“U.S. value fund managers betting shift to value stocks won’t last” – Reuters
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Citi research helpfully provided three research reports regarding the oil supply outage in Saudi Arabia. Highlights,
“Will The Oil Price Shock Tip the Global Economy into Stagflation? … How much the oil price shock is transmitted depends on how long it is sustained. Temporary shocks have less impact than do permanent ones. 2) The ~USD10/bbl or ~12% price shock merely returns oil prices to the vicinity of recent months. Therefore, it matters whether the price shock gains momentum … Early indications that the Kingdom’s production would be restored quickly were wrong. It now appears that full recovery could take through year-end, with anywhere between 1- and 2.5-m b/d remaining off line … Citi commodity strategists think that markets have been persistently mispricing oil supply risks, perhaps by $10 a barrel … Oil stocks are well represented in most global Value indices. A higher oil price should give a further boost to recent Value rotation.’
I will add to this that volume in U.S. oil futures markets set a record Monday, part of which was likely short covering on the commodity price.
“@SBarlow_ROB Full oil disruption implications roundup from C” – (research excerpt) Twitter
“@morrisonmkts Volume in WTI Crude @ 3.55 million contracts Monday surpassed the previous volume record of 11/30/16 by 40%. The latter was when OPEC announced production cuts of 1.2 mbpd” – Twitter
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Citi strategist Hong Li argues that defensive equity sectors, like utilities and consumer staples, are at extreme valuation levels, while short interest in higher volatility market sectors has declined significantly,
“Low Beta is now most crowded with extreme valuations, historically high macro risk and increased short interests in North America high beta stocks.”
“@SBarlow_ROB C: low beta is really, really expensive” – (chart) Twitter
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Tweet of the day:
Diversion: “ Factbox: The U.S. opioid epidemic in the courts” – Reuters
Newsletter: “ How investors should think about the market’s unpredictable future” – Globe Investor
Scott Barlow