Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO chief investment strategist Brian Belski continues to argue that Canada is the best contrarian investment call for global investors,
“Given the strong value position of the TSX relative to other global markets, we continue to believe Canada is well positioned for an extended period of NORMALIZATION that we expect to unfold over the coming years … While our initial target was not reached in 2023, we believe the rebound we expected for the Canadian stock market was only just delayed as investors digested the impact of higher rates on the Canadian consumer. As such, as the reality of a more resilient economy and rebounding earnings growth in the second half transpires, we believe the TSX can and will attain higher prices with a 2024 year-end price target of 23,500 on earnings of $1500. This represents a 6-per-cent return based on March close and a multiple improvement to 15.7 times from the current level below 14 times - still well below the long-term average multiple of 17 times. YES, Canada is the contrarian call in 2024. Fundamentally Canadian equity markets continue to display strong and stable cash flow generation. Combined with the near-record relative valuation discount advantage is among the primary reasons we believe the TSX is a strong contrarian call and well positioned for outperformance in 2024 versus the US and other global markets as valuations normalize”
Mr. Belski is overweight domestic communications services, consumer discretionary, financials and information technology stocks.
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Goldman Sachs chief U.S. equity strategist David Kostin warned clients that markets are under-estimating the risk that the U.S. presidential election will not be decisive,
“Election day this year will take place in 186 days (November 5th). Our economists believe that ‘the polling margin in the ‘tipping point’ state that provides the potential 270th electoral vote is one of the most important election metrics to watch.’ They note that while Biden has drawn nearly even in national polling, he trails by 2 percentage points in the tipping-point state and by 4 pp when averaging all 7 swing states. If the margin of victory in certain swing states is narrow, as was the case in both 2016 and 2020, then recounts are likely. In 23 states – including the swing states of Arizona, Michigan, and Pennsylvania – provisions exist for automatic or mandatory recounts if the margin between the top two candidates is within certain parameters, typically 0.5 per cent. However, 41 states permit a losing candidate to petition for a recount … The volatility market does not appear to be pricing the risk of a prolonged election”
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BofA Securities strategist Ritesh Samadhiya implements the firm’s global wave indicator, which signals economic and corporate profit growth, to outline a bullish stance,
“The Global Wave (see note) strengthened for the fourth month in a row, partly driven by rising Industrial Confidence and Consumer Confidence in more than 50 per cent of countries around the world, as manufacturing PMIs set sail on a new cycle. In North America, the U.S. Regime Indicator progressed further within the ‘Recovery’ phase with the strongest MoM [month-over-month] improvement in more than two years, while the Canada Cycle Indicator (see note) stepped into an upturn. Across the Atlantic, the European Composite Macro Indicator (see note) climbed higher as well, buoyed by better business climate in Germany … In the Emerging world, manufacturing PMI has bounced into the top tertile of the past two decades, as China crawls back into the radar with back-to-back beats to consensus manufacturing PMI estimates for three months in a row. The Asia Fund Manager Survey sees clearer skies ahead, with net 28 per cent of the panelists expecting a stronger economy in China over the next 12 months versus down 10 per cent in February … The Industrial Momentum Indicator stormed past the long-term average level with the biggest monthly spike in its 12-year long history on rising Copper prices and more favorable Fund Manager positioning”
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Diversion: “NASA hasn’t landed on the moon in decades – China just sent its third [mission] in six years” – Ars Technica (soft paywall)
Scott Barlow