Citi expects peak oil prices in the near term

Citi expects peak oil prices in the near term

Daily summary of research and analysis from Scott Barlow, Market Analyst at Globe and Mail

Earnings reviews, among the most important factors driving stock market returns, continue to weaken according to Morgan Stanley US equity strategist Michael Wilson,

“As expected, the earnings review breadth has moved into negative territory but has not been negative enough yet for non-tariff measures to be taken. [next 12 months] EPS down. In the absence of an obvious shock such as a recession, companies are slow to direct. This time shouldn’t be any different which means stocks could hover around current levels until the second quarter earnings season… Real estate has seen the strongest revisions over the past four weeks. Food and beverages, tobacco, commercial and professional services and materials also saw a positive change in revisions. The weakest reviews came from tech industry and consumer groups. Food and merchandise retail reviews have collapsed over the past four weeks due to concerns about cost pressures. Consumer appreciation has also seen continued weakness in reviews over the past four weeks. The reason for this weakness was consumer durables, apparel and retail trade. Tech Hardware also saw weakness in the breadth of reviews…”

Mr. Wilson calls for a market bottom during second-quarter earnings seasons here.

MS’s Wilson: “Stocks could swing around current levels into the second-quarter earnings season as the next bottom line is likely to start and end. – (research excerpt) Twitter

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Savita Subramanian, a quantitative strategist at Bank of America, warned clients against trying to fish in tech stocks,

“Tech has been the best sector by a large margin over the past decade (+145ppm vs. SP500) but peak liquidity, bottom rates, inflation, volatility/congestion in negative funds, anti-trust grumbling, and near-support pressure present risks. Technology has also historically been the worst performer during stagflation (Fig. 11).Furthermore, the cyclical tailwind is reversed – COVID has dragged demand forward and created tough companies…When is it time to buy technology?When you stop asking.In In the aftermath of the tech bubble, it took several years for technology to hit rock bottom, but only after many companies disappeared, those left with consolidated capacities, capital backed, and most importantly, after investors succumbed to the sector.Today, this is not the case: it dominates On screen orders “Growth and Technology washed”, Technology and TMT remain the most overweight sectors, Growth still trades in one position. Dave. Expensive for value. Despite what appears to be a violent turnover, growth is still advancing at 335 part of million since 2008, but in the long run (back to 1926) the value has outpaced growth by 3.6 ppm annually”

Interestingly, stock screen orders from BofA clients are for ‘cheap’ tech stocks and I think Ms Subramanian makes the key points here, particularly as active funds continue to add weight to the sector. Overall, it’s probably time to move on from tech stocks for a while.

BofA: When is a good time to buy a Tech? When you stop asking “” – (research excerpt) Twitter

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Like Mr. Wilson, Citi strategist Edward Morse appears to advocate a near-to-medium-term market tipping point, this time the top potential market for oil,

“We are reviewing oil prices for a rally in the Iran delayed deal as the second quarter enters the market, but we continue to see a downward trend in prices after a thorny period in the near term. Russian oil production and exports continue to erode, but reconfigured flows to Asia may mean they will not decline Equally.Other supplies are still increasing, but Iran is still an alternative capacity.At the same time, demand is still experiencing significant downside risks…We continue to see US crude oil production growth at +0.7 million barrels per day in 2022. .. + 1.3 million barrels per day of crude oil production in 2023 … Elsewhere, Argentina, Brazil, Canada, Colombia, Guyana and Norway is increasing … Demand is eroded by lockdowns in China, economic slowdown, and rising prices. It could facilitate a shift from gas to oil in the future, with natural gas prices in Europe and Asia now back below diesel equivalent prices”

How much Russian oil goes to China is an undercover story in my opinion – I don’t have data yet.

“Citi’s Morse Sees Near-Term Peak for Oil Prices” – (Extract from research) Twitter

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Transformation: “Does coffee help you live longer? It’s complicated” – Gizmodo

Today’s tweet:

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2022-06-06 12:10:34

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