‘Rich people own stocks. Poor people own houses’

A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Goldman Sachs presented some remarkable statistics in “Wealth and equity flows: How the top 1% of households compares with the rest,”

“Household equity purchases have been driven solely by the wealthiest 1% during the past 30 years. Since 1990, the top 1% has bought $1.2 trillion of equities and mutual funds compared with $1 trillion of net selling by the remaining 99%... We expect households will remain net buyers of stocks this year but demand will likely be lower than in 2019. Among the wealthiest households, the boost to equity demand from accelerating economic growth will likely be partly offset by near-record high equity allocations.”

“@SBarlow_ROB GS: "Since 1990, the top 1% has bought $1.2 trillion of equities and mutual funds compared with $1 trillion of net *selling* by the remaining 99%."” – (research excerpt) Twitter

“@SamRo Rich people own stocks. Poor people own houses” – (chart from GS report) Twitter

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Bank of Canada Deputy Governor Paul Beaudry made a speech in Quebec Thursday that strongly implied the central bank is reluctant to cut interest rates in light of current high household debt levels,

“He argued that elevated financial vulnerabilities in an economy created a conflict between the short term aims of central banks and the long-term effects of their monetary policy decisions. “[A] fall in interest rates can now cause an initial boom in economic activity as more household debt increases consumption”, he said, “but this may be followed by a later bust if the accumulation of household debt becomes a drag on consumer spending.” In other words, the Deputy Governor suggested central banks needed to stay alert to the fact that, in trying to fulfill their mandate, say by easing monetary policy in the short term, they could create problems in the future that would make it harder for them to fulfill their mandate in the long term.”

“@SBarlow_ROB NBF: BoC reluctant to cut rates” – (research excerpt) Twitter

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Citi global strategist Robert Buckland believes the ongoing coronavirus-related market sell-off is over done and is urging clients to buy the dip,

“We are wary of overdoing the SARS parallels. Back then the global equity market was three years into a 50%+ bear market. The Iraq war had just started (Figure 3). The importance of Chinese economy was lower and its composition was also different… the outbreak comes at a time when Tobias Levkovich’s US Panic/Euphoria indicator was suggesting some short-term caution was appropriate. This had just moved into Euphoria territory, which has provided a useful sell signal in recent years (in January and August 2018). Maybe global equity markets were due a set-back anyway. The coronavirus has proven the catalyst… Our Bear Market Checklist tells us that it is still too early to make this call. We had got up to 5/18 red flags just before this latest sell-off. This is the highest we have seen in this cycle (2011 was the other time, Figure 10) Panic/Euphoria is the latest flag to turn red (Figure 11). But 5/18 just isn’t enough for us to stop recommending that investors should keep buying the dips. We don’t need all 18 to turn red to finally turn bearish, but we certainly need more than 5.”

“@SBarlow_ROB C: bear market checklist says Buy the Dip” – (research excerpt) Twitter

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Column: “Why Canada’s big bank stocks are likely to gain 20 per cent within two years (and that doesn’t even include dividends)” – Barlow, Inside the Market

Diversion: “Ray Dalio: We ‘Don’t Have a Clue’ How Coronavirus Will Impact Markets” – Institutional Investor

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