Latest from BCA Research

The latest version of the MacroQuant model suggests that the bull market in US stocks is winding down. The model expects Treasury yields to fall later this year but is not ready to go long duration just yet.

Special Report

China barely hit its growth target in 2024 by shifting back to its old model of exports, racking up a record trade surplus with the world – right as Donald Trump walks back into the White House. Tariffs will elicit larger fiscal stimulus even as China rolls out innovations such as DeepSeek to meet its 2025 industrial goals, creating a volatile mix this year.

Core PCE inflation came in soft this morning and is tracking well below the Fed’s 2025 forecast. We highlight three upside risks to inflation and preview next week’s employment report.

Asset class expectations show mixed shifts from 2024, with Real Estate seeing substantial upgrades and Private Equity benefiting from Venture Capital improvements. Private Credit return expectations decline from 2024 but remain relatively attractive. Infrastructure shows varied dynamics across sub-strategies, with Value-Add offering strong return potential. Within Hedge Funds, Long-Short Equity shows higher tactical returns while Multi-Strategy leads strategic projections.

This week, our three screeners explore global small-cap value stocks, European equities, and BCA’s nuclear energy themed equity baskets.

The ECB cut its deposit rate to 2.75%, as was widely anticipated. President Christine Lagarde did not provide any fireworks, but the Governing Council’s message was clear: Policy is restrictive, and inflation will fall further. As a result, if we combine our economic forecasts for the Eurozone with Frankfurt’s data dependency, we continue to expect the ECB’s deposit rate to settle below 2%. Consequently, German bond yields have downside, and the euro has yet to bottomed.

Bank Credit Analyst

In Section I, Doug highlights that recent trade developments and news from the AI space are both consistent with a conservative investment stance. US final demand was robust in Q4, but the economy is still walking a tightrope as cracks in the labor market emerge. It is possible that an unorthodox set of policy prescriptions will cause US growth to inflect higher, but that is not yet our base case view. We recommend downgrading global growth stocks to underweight versus value. In Section II, Jonathan provides an update on Canada following strong performance from Canadian stocks last year. On a tactical basis, underweight Canada versus global ex-US on the expectation of tariffs targeting Canada and Mexico. Following a sell off, or if a trade war is avoided, investors should place Canadian stocks on upgrade watch with the goal of moving to a modest overweight versus global ex-US.

Bank Credit Analyst

Jonathan provides an update on Canada following strong performance from Canadian stocks last year. On a tactical basis, underweight Canada versus global ex-US on the expectation of tariffs targeting Canada and Mexico. Following a sell off, or if a trade war is avoided, investors should place Canadian stocks on upgrade watch with the goal of moving to a modest overweight versus global ex-US.

US tech stocks as a share of world stock market capitalisation is at an all-time high that exceeds even the peak of the dot com mania in 2000. At the other extreme, Europe’s share in the world stock market is at a 50-year low. While I am optimistic about the potential of generative-AI, I am not as manically optimistic as the market. And while I am concerned about the current malaise in Europe’s economy and politics, I am not as depressingly concerned as the market. For me, the AI mania combined with Europe’s current malaise is a 50-year mispricing… and opportunity. Plus: go tactically short coffee.

This Insight looks at what investors should do with CAD and fixed-income assets, given the rate cut by the Bank of Canada today.