Daily roundup of what research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Capital Markets head of U.S. equity strategy Lori Calvasina highlighted the most important trends in U.S. markets,
“The big things you need to know: First, the Misery Index has fallen sharply since last summer, helping explain the surprisingly strong move in the S&P 500 this year. Second, deleveraging was a one key theme that jumped out to us from RBC’s Industrials conference last week. Third, other things that jumped out from our high frequency indicators last week include the recent improvement in bottom-up 2023 S&P 500 EPS forecasts and the return of U.S.
“The best way to express that in a portfolio is to hold a barbell of defensive growth with late-cycle cyclicals … We continue to believe it’s too early to pivot to small/mid caps despite their significant underperformance YTD … In addition to Industrials, we recommend Energy on a relative basis within broader cyclicals. The sector is historically a late cycle outperformer that is often supported by commodity strength in such backdrops.
Mr. Wilson included the results of a stock screen in search of growth stocks with low volatility. Those most likely of interest to domestic investors include Apple Inc., Boston Scientific Corp., Colgate-Palmolive Co., General Electric Co., Mastercard Inc., McDonalds Corp., Microsoft Corp., Rockwell Automation Inc., Thermo-Fisher Scientific, Visa Inc. and Yum Brands Inc.Barclays strategist Venu Krishna does not believe U.S. stocks are worth the risk.
“Strictly speaking, the ERP has been depressed from a historical perspective since late last year, but dipping below IG credit spreads despite the intrinsically greater capital structure risk gives us incremental reason to revisit what exactly is being priced into equities at these levels. As with market leadership, the ERP question revolves around Tech, and whether a handful of stocks is causing the overall SPX risk premium to appear too low.
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