Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities commodity strategist Javier Blanch published his short and mid-term forecasts for global oil prices,
“Coupled with limited US shale supply growth and OPEC’s tight grip on the market, we now expect the reopening of China to result in Brent crude oil prices averaging $88/bbl in 2023, down from $100/bbl prior, and $90/bbl in 2024. Why? Russian oil output has exceeded expectations in recent months due to lax EU/US sanctions . Yet oil prices should still recover as mobility in the Asian region gains steam over the next 18 months.
“US Tech behemoths have been losing some steam lately, with the Nasdaq underperforming the S&P 500 by over 550bp so far in 2023. Weaker profit trends partly explain why the rally recently hit a wall as Tech endured a couple of months of EPS contraction .... S&P 500 Tech, Media & Entertainment, Internet Retailing 12-month forward EPS fell into contraction territory in October 2022, and now exhibits weaker EPS trends than Defensives , Cyclicals ex-TMI and Resources .
“With inflation running higher than at any point since the 1970s, we have another key difference. The Federal Reserve is hiking rates to bring inflation down. This hiking cycle is the first since the 1970s with that motivation. Put differently, in most previous cycles, hiking rates went along with strong growth, and when growth and earnings showed signs of slowing, policy retreated.
“So, where does this discussion leave us? Why is it important to highlight the differences in this cycle? We have had a “soft landing” view for the US for a long time. The pushback has consistently been that previous cycles have not had soft landings, so it is not reasonable to forecast one now. We were comfortable that there were enough differences in the cycle to produce a different outcome.
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