Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Citi analysts Tom Mulqueen and Maximilian J Layton lowered their price target for copper, zinc and nickel, “We lean modestly bearish copper near term as net speculative positions imply the market is pricing a stronger global growth recovery than our economists expect.
We revise our copper 0-3-month price forecast to $8,500 per ton – Last month we highlighted upside in copper from short covering. However, this failed to materialise as faltering macro-sentiment relieved pressure on shorts. In a more recent note we reiterated our belief that copper is already pricing a China-led growth recovery … We expect further zinc price downside in the months ahead and abandon our previous call for price resilience in Q1Zinc hit our 0-3 mth pt price forecast of $3,500/t in late-January but since has retreated to as low as $3,000. In our January note, we detailed our bearish zinc price view beyond Q1′23 on the prospect of improving supply as softer European power prices and a global concentrate surplus raised the likelihood of zinc smelter restarts. We believe the market has started to price this in sooner than we expected … We move our 0-3-month price forecast to $2,900 per ton , revise our Q1′23 average forecast to $3,100/t … Missing nickel discovery supports our bearish price view - Last week, Bloomberg reported Trafigura recorded a $577 million impairment after discovering missing nickel in cargos it had purchased as part of a repo arrangement … We reduce our 0-3-month nickel price to $24,000/t , while revising our Q1′23 average price forecast higher to $27,000/t , within 20x-59x historical fwd. PE range as AI adoption potentially catalyzes long-term data center growth…We forecast generative AI to drive a $62bn accelerator TAM [total addressable market] by CY27, 6x vs CY22 levels and $20bn incremental to conventional AI base case.”Alex Makedon, cross-asset and quant strategist also at BofA Securities argued for value investing strategies indespite the popularity of price momentum strategies among current portfolio managers , “‘Price is the best predictor of price.’ We hear this a lot, and the unwavering faith in price momentum investing is likely attributable to a liquidity-fueled decade … The average portfolio manager has seen a financial crisis during which statistically cheap stocks were traps, followed by a decade during which value factors destroyed alpha almost every year while investing based on past price return turned in hefty alpha. The few value investors left see post-COVID shifts as a sort of come-uppance: Value has returned 30 ppt since December 2020, whereas price return produced no alpha. And prior to the GFC, valuation was a far better signal than basing future forecasts on past price returns”
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