A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
The relative performance of momentum and value stocks this month continues to soak up a lot of financial media oxygen – I even wrote a big column about it!
The stakes are no doubt high.
Goldman Sachs strategist Ben Snider argued that the change in trend, with value stocks now outperforming the momentum stocks that have led the post-crisis market rally, could spell a long term change in equity market leadership (my emphasis),
“At the industry level, the Momentum reversal has reflected a rotation away from bond proxies like Utilities and secular growth stocks like Software & Services in favor of cyclicals like Consumer Durables that had lagged during most of the past 12 months… Sharp Momentum drawdowns similar to the one that has taken place in the last two weeks usually mark the end of the Momentum rallies rather than tactical buying opportunities… The 14% Momentum decline of the last two weeks has already reached the median historical episode’s trough, which typically occurred about six weeks after the Momentum peak.”
In simpler terms, the end of momentum would be bad news for technology stocks (like FAANG and Shopify Inc.) and dividend heavy sectors (like utilities and REITs).
“@SBarlow_ROB Yikes. from GS: “Sharp Momentum drawdowns similar to the one that has taken place in the last two weeks usually mark the end of the Momentum rallies rather than tactical buying opportunities”” – (research excerpt) Twitter
“What the recent ‘equity earthquake’ means for Canadian investors” – Barlow, Inside the Market
“Drop in hot stocks stirs memories of ‘quant quake’” – Financial Times (paywall)
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BMO chief economist Doug Porter was blunt in his assessment of the Canadian housing market,
"Canadian Housing…It’s Baaaack. With most of the major city results now in for the month of August, it looks like Canadian home sales were up about 7% from a year ago and prices turned in another moderate gain. Many have commented that the correction in Canadian housing appears to have run its course. We would go farther than that—the housing market has not only stopped correcting, it’s basically right back on track, at least by some measures… [Outside of British Columbia] what we see is the value of sales rising right back to the underlying 10-year trend growth line (and that’s before we insert the August numbers, which should take sales above the line).”
“@SBarlow_ROB BMO: "•Canadian Housing…It’s Baaaack"” – (research excerpt, chart) Twitter
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Citi’s U.S. equity strategist Tobias Levkovich is constructive on S&P 500 returns, but his colleague Catherine Mann, the firm’s global chief economist, still sees risks tilted to the downside,
“Improving economic data surprises and encouraging news do not change our global view. Citi’s economic surprise indices currently signal a less negative growth outlook compared to early-August but this reflects more bearish analyst forecasts and only mildly stronger data. Key global risks remain unresolved. The US and China will restart trade talks but we see no chance of a deal before the 2020 US elections. No-Deal Brexit looks to be averted but the Brexit saga is far from over. ECB stimulus may help repair underlying disconnects but it is not the best antidote. The PBoC RRR cut and improved credit data are not enough to reduce China slowdown fears”
“@SBarlow_ROB C's Mann: Risks still tilted to the downside” – (research excerpt) Twitter
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Tweet of the Day:
Diversion: “Are your feet different sizes? This Ontario woman is searching for her shoe twin” – CBC
Scott Barlow