A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Merrill Lynch research has published its top 10 stock picks - eight longs and two shorts - for the third quarter of 2019.
Longs include Advanced Micro Devices Inc. (which caught my attention), Northrup Grumman Corp. and Dropbox Inc.
Shorts are Illinois Tool Works Inc. and RH [Restoration Hardware Holdings Inc].
“@SBarlow_ROB ML top 10 stock picks for Q3” – (full table) Twitter
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Both Merrill Lynch quantitative strategist Savita Subramanian and Nataxis chief economist Joseph Lavorgna warned investors that the global economic slowdown is likely to continue. Ms. Subramanian first,
“The latest read from BofAML’s Library of Proprietary Indicators – a compendium of proprietary indicators that reflects the insights of BofAML Global Research analysts – is pointing to continued weakness in growth. Despite capitulation from global central banks, leading indicators continue to sink deeper … We see downside risk to consensus’ expected double-digit EPS growth in 2020 if global growth fails to pick up … “
“@SBarlow_ROB ML: "Despite capitulation from global central banks, leading indicators continue to sink deeper'” – (research excerpt) Twitter
"@SBarlow_ROB Lavorgna: “deceleration should persistent for several reasons: the lagged effects of monetary tightening, election year uncertainty and renewed softness in productivity growth.” – (research excerpt) Twitter
Donald Trump’s tweet this morning implies that trade ongoing talks in Shanghai are not going well.
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I mentioned the popularity of esports and gaming in yesterday’s column and my search for a stock to play the theme (see comment on AMD above). Nintendo is unlikely to be the pick as it missed earnings forecasts,
“Q1 [operating profit] came in at ¥27.4bn, down YoY and below our forecast of ¥31.2bn. We suspect the main cause of the YoY fall in earnings was lower sales volume for the Nintendo Classic Mini series (to 30,000 units from 1.74mn). We surmise that earnings also fell on a slight increase in SG&A expenses and forex (euro to ¥123/€ from ¥130/€ YoY). Switch hardware sales came in at 2.13mn units, ahead of our 2mn unit forecast’
“@SBarlow_ROB Nintendo disappoints (Citi)” – (research excerpt) Twitter
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A Financial Times column highlights the risk of “Japanification” in the global economy and markets,
“A lost decade of low growth and low inflation — ‘Japanification’ for short — is now the big risk in major markets. The billion-dollar question is: what should investors do in response? … ever-lower developed-market rates will not halt the global search for yield, nor by extension the appetite for risk. The hunt for yield will remain key to boosting the total returns of portfolios. Expectations of liquidity from central banks will probably exacerbate the richness of global assets. But eagerness to outperform benchmarks is likely to push investors into the riskiest and least liquid areas. Fear of the transmission effect from financial assets into the real economy looks set to maintain the vicious circle between central bank intervention and risky assets, at least for now… Second, the scarcity of safe-haven assets will remain a painful reality’
“Investors must rethink portfolios in era of low debt yields” – Financial Times (paywall)
“What will Canadian investors do if government of Canada yields go negative”? – Barlow, Globe investor
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Tweet of the Day: “@Noahpinion The Bay Area has made me feel the reality of inequality in a way that no other place ever has. It’s dystopian. It’s Victorian. It’s a class society right out of a young adult novel’ – Twitter
Diversion: “The Brain-Eating Amoeba Is a Nearly Perfect Killer” – The Atlantic
Column: “ Keep an eye on U.S. corporate bond spreads” – Barlow, Inside the Market
Scott Barlow