A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Gold, oil and the U.S. dollar are higher Friday morning after American military attacks on prominent Iranian and Iraqi military figures.
London-based Capital Economics published some early thoughts on the investment risks, focusing on sharply higher crude prices,
“Clearly, the major concern for the world economy is that events spiral out of control and the US launches a full-blown military assault on Iran…the resulting collapse in Iran’s economy could knock as much as 0.3%-pts off global GDP – equal to our estimate of the damage from the US-China trade war … Second, and more importantly for the rest of the world, oil prices would surge. In response to last night’s events, oil prices have risen by more than 3% today to $68pb. But if Iran tried to close off the Strait of Hormuz, we’ve previously estimated that Brent crude would jump to $150pb”
“@SBarlow_ROB Capital Economics: Closure of Strait of Hormuz could cause $150 oil” – (research excerpt) Twitter
“Premarket: Oil, safe havens surge as U.S. strikes kill Iranian commander” – Report on Business
“Qasem Soleimani: Why kill him now and what happens next?” – BBC
“Oil prices ‘could make a run at $80’ if US-Iran conflict intensifies, analysts say” – CNBC
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Citi strategists are focusing on a chart first noted by Goldman Sachs showing that U.S. equity sector valuations reflect a stable relationship between price to book value and return on equity.
The chart is definitely worth a look for valuation-conscious investors looking to understand current market pricing,
“@SBarlow_ROB Citi is now on the ordering of U.S. stock valuations by P/B and ROE. I think it was Kostin at GS noticed first” – (chart) Twitter
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The equity market rally of 2019 occurred despite very weak earnings growth.
Merrill Lynch quantitative strategist Savita Subramanian is still bullish on U.S. equities for 2020 but warns that the beginning of the year could be volatile for markets,
“We likely saw some of 2020′s gains pulled into 2019, and would expect more realistic returns in 2020… Our near-term indicators suggest that markets could have a weak start to the year. In December, the S&P 500 three-month (3m) Earnings Revision Ratio (ERR) essentially flat-lined (0.68 vs. November’s 0.67). A ratio below one indicates more cuts than increases to earnings estimates, and today’s ratio remains not just below one but below its long-term average of 0.86… “
“@SBarlow_ROB ML: 2% SPX upside for 2020’ – (research excerpt) Twitter
“@SBarlow_ROB S&P sees Q4 EPS growth at -.3 yoy” – (table) Twitter
See also: “S&P takes most bearish stance on U.S. corporate debt since 2009” – Bloomberg
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Diversion: “Alien life is out there, but our theories are probably steering us away from it” – The Conversation
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