Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The monthly BofA survey of global fund managers found a lot of bullishness,
“Most bullish FMS [fund manager survey] in 2 years, cash levels cut to 4.2% from 4.8% as global growth expectations hit 2-year highs and investors go all-in on US tech … For first time since Apr’22, investors not predicting recession … asked for path of economy this year, 2/3 of investors say ‘soft landing,’ 1/5 say ‘no landing,’ 1/10 say ‘hard landing’ … Lower interest rates the catalyst for optimism: just 4% expect higher short rates, just 7% expect higher inflation and 85% say yield curve will steepen … ‘Long Magnificent 7′ most crowded trade since “long US$” in Oct’22 (= big inflection point); ‘short China stocks’ 2nd most crowded trade and 1/4 say structural UW [underweight] of China is right strategy … FMS Contrarian Trades: for ‘hard landing’ – long cash, defensives & short US/Japan & tech stocks; for ‘no landing’ – long commodities, energy, US$ & short bonds”
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Wells Fargo analysts Mason Mendez and John LaForge believe we remain in the early stages of a commodity super-cycle,
“As a refresher, commodities are assets that move together through long-term boom (bull) and bust (bear) periods, known as super-cycles. Prior to 2020, we had witnessed six bulls lasting 17 years on average. The two most recent bull super-cycles, starting in 1971 and 1999, however, lasted only nine years each … 2023 was a lackluster year for most commodities, which has some wondering if we remain bullish. Our answer is yes; we remain bullish on commodities, and likely will for a few more years … Historically it has been common for commodity prices to take breathers during bulls. Our take is that the bull will likely resume sometime in 2024. We believe this because the underlying driver of commodity bulls, lack of supply growth relative to demand growth, remains intact. And we do not expect to see this balance changing anytime soon. Price weakness in 2023 has kept supply growth muted for many commodities, while demand is likely to improve as global central banks cut interest rates in 2024 … We view recent price weakness as an opportunity for investors to gain exposure to commodities for the next leg of the commodity bull super- cycle”
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JP Morgan U.S. equity strategist Bhupinder Singh predicts that market leadership will remain narrow,
“Earnings growth in this higher rate environment, it’s not 8% or 10% or the double-digit growth that consensus expects for next year, but rather mid-single digit until we have a recession or ultimately a slowdown. In terms of performance as sector positioning, we expect equities to perform more or less in line with what we saw in the first 10 months of last year, not the last three months. This means more stock concentration as long as rates remain higher for longer. These top 10 stocks or top 20 stocks are going to get more and more concentrated and the leadership is going to remain very narrow. So, we expect these long momentum trades on, like the long-term momentum trades that are 12 to 24 month momentum trades to just keep working on a relative basis. And why? Because these are the companies that have higher liquidity, most importantly, they have sustainable growth and pricing power, whereas most of the companies in the US and globally are struggling “
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Diversion: “A Cat in Oregon Gave Bubonic Plague to Its Owner” – Gizmodo
