Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
I’ve been referring to Morgan Stanley strategists – U.S. equity strategist Michael Wilson and global equity strategist Andrew Sheets in particular – because they have been the most accurate forecasters among the major Wall Street firms.
Most recently, Mr. Wilson predicted the S&P 500 pullback while remaining bullish on the next 12 months.
In his latest Weekly Warm-up report Mr. Wilson wrote,
“We remain committed bulls over next 6-12 months. When bull markets simultaneously begin with a new economic cycle, they typically last for years, not months or quarters. As such, we believe this bull market has a long way to run both in time and price. Our calls for a 10% correction in August and then again in October were under the guise that we needed a pause / consolidation of the extraordinary gains during the first stage of this new economic cycle … importantly for markets, we believe, are the runoff races in Georgia that will decide the Senate majority – something we won’t know for 8 weeks… we continue to be bullish over the next 6-12 month but very cognizant and disciplined about price in the short term … argues for overweights in procyclical sectors, and growth at a reasonable price (GARP) stocks while remaining careful with high quality defensive or secular growth stocks that may be overpriced for such an outcome.”
This outlook informs the strategists’ Fresh Money Buy List of U.S. stocks where Ally Financial Inc. is the most recent addition. Citizens Financial Group Inc., Linde PLC., and PVH Corp. represent cyclical exposure. The other names on the short picks list are Walt Disney Co., Humana Inc., Mastercard Inc., S&P Global Inc. and T-Mobil U.S. Inc.
“@SBarlow_ROB MS: Fresh money buy list (U.S.)” – (table) Twitter
Recent talk of a “new paradigm” for large cap tech stocks is giving Citi’s U.S. equity strategist “the willies” (my emphasis) ,
“We have heard some ‘new paradigm’ talk of late, suggesting that the very large growth tech-driven (disruptor) stocks with extraordinary cash positions and business leadership provide great value and therein represent a different asset class than traditional equities. To be candid, such descriptions give us the willies and remind us of the New Economy arguments of 1999 and ‘home prices always go up’ discussions of 2006. While we are Overweight the IT sector, (and still maintaining an Underweight for Software & Services) we remind clients that valuation criteria is worrisome and we have Tech Hardware (currently Overweight) on a Downgrade Watch… pension and endowment funds cannot earn the required returns given low interest rates and there are substantial existing liabilities… e continue to like the Health Care Equipment & Services industry group which benefitted significantly from the election outcome thus far, given attractive valuation and our lead indicator model. Furthermore, the outlook for job trends supports our positive Consumer Services stance and we think the Capital Goods industry should gain from better ISM data”
“@SBarlow_ROB ‘new paradigm’ talk gives Levkovich ‘the willies’ – (research excerpt) Twitter
Diversion: “This Standing Keyboard Is So Cursed” – Gizmodo
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