A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
It hasn’t felt like it for Canadian investors this year, but the market backdrop of the past nine years – low rates, steady non-inflationary growth in developed markets and strong expansions in emerging markets – has been very conducive to strong portfolio returns. HSBC strategists wrote, however, that investors are now faced with “The End of Easy,”
“We believe that 2019 will be increasingly challenging for risk assets. Performance differentiation between sovereign fixed income and equities will likely decline. This is probably the end of easy: the benign market conditions and wide differential in asset class performances look set to fade. Hence investors will need to invest much more tactically in the coming year.”
“@SBarlow_ROB HSBC: “The End of Easy”” – (research excerpt) Twitter
***
A report from the Bank of Canada implies that fears of a household credit bubble leading to severe negative consequences for the economy are overdone,
“ Ms. Wilkins pointed to another report, released Wednesday by the bank, that shows slowing mortgage activity and a sharp drop in new heavily indebted borrowers since the end of 2016. The share of new mortgages deemed high-leverage – in which people are borrowing 4.5 times their annual incomes – has dropped to roughly 6 per cent, down from more than 20 per cent in 2016. .. the bank said the probability of a major housing correction remains low. And if it did happen, the effects would not be large enough to trigger funding withdrawals or asset fire sales at the country’s Big Six banks thanks to their international diversification and high retained earnings.”
“Bank of Canada survey finds fears of economic slump on the rise” – Report on Business
“Canada’s six biggest lenders would be able to absorb losses from a housing crash in Vancouver and Toronto” – Bloomberg
***
Facebook management is in really big trouble, or at least they should be,
“On Wednesday, the New York Times reported that as critics ramped up a campaign charging that Facebook’s aggressive international expansion efforts led it to ignore numerous incidents in which it was “exploited to disrupt elections, broadcast viral propaganda and inspire deadly campaigns of hate around the globe,” the company sought to discredit those critics using a variety of dirty tricks. One of those was contracting Definers, which waged a campaign to “cast Mr. Soros as the unacknowledged force behind what appeared to be a broad anti-Facebook movement.””
“George Soros Foundation Calls Facebook 'Vile,' 'Reprehensible' for Pushing Conspiracy Theories” – Gizmodo
“ @JamieJBartlett I can’t quite believe what I’m reading in this @nytimes investigation: that Facebook had a firm working to discredit its critics, in part by linking them to George Soros. nytimes.com/2018/11/14/tec…” – (NY Times excerpt, link ) Twitter
***
Citi economists are worried about a prolonged slowdown in the Chinese economy and the negative effects this will have on commodity prices,
“ October macro data suggest a continued slowdown in China’s household consumption, with total retail sales decelerating in real and nominal terms and auto sales printing another double-digit decline y/y … Industrial commodity prices are relatively range-bound after the data release, suggesting that the market isn’t giving much credit to the prompt [fixed asset investment] rebound while still heavily discounting forward prices on a potentially sharper slowdown of economic growth into 2019… It also remains unlikely that the government would allow nationwide property sales to boom again given the significant increase in household leverage over the past two years “
“@SBarlow_ROB C sees continued slowing in China” – (research excerpt) Twitter
“ China’s response to its slowing economy and the trade war — in charts” – Financial Times (paywall)
“@SBarlow_ROB From the FT: China's infrastructure boom over?” – (chart) Twitter
“ Oversupply fears cloud outlook for U.S. crude in 2019” – Reuters
“ Oil's Record Plunge Is a ‘Made in America’ Phenomenon, Citi Says” – Bloomberg
“ Oil and copper reinforce the idea that the global economy is headed toward a synchronized slowdown” – Bloomberg
***
Tweet of the Day:
Diversion: “Why Are Young People Having So Little Sex?” – The Atlantic
Scott Barlow