Latest from BCA Research

Bank Credit Analyst

The adrenaline from the recent policy stimulus might be sufficient to produce a window of outperformance for Chinese equities and China-plays in financial markets. However, this adrenaline will not extend to China's real economy. Net-net, we are upgrading the allocation to EM in a global equity portfolio from underweight to neutral.

Bank Credit Analyst

Bank Credit Analyst

In Section I, we provide an update of our views following the September FOMC meeting and recent announcements from Chinese policymakers. The Fed’s decision this month has modestly increased the odds of a temporary soft-landing outcome. Still, recession remains our base case scenario, and forceful easing also raises the odds that disinflation will end or that inflation will reaccelerate. In China, policymakers are reacting in a panicked fashion to an impending major slowdown. They will likely succeed at preventing that decline, but preventing a further slowdown does not equate to a major acceleration in growth. Stay conservatively positioned. In Section II, we review why real nonresidential fixed investment is unlikely to prevent a US recession.

China’s Politburo announcement is likely to lead to a repricing of China’s growth in the near-term. Read how investors can hedge against this potent threat to our defensive investment stance.

In my view, the revisions resolve a big puzzle that has developed over the past two years, which is how employment growth could have been so strong while personal income growth was so weak. Well, as it turns out, income growth was quite strong too.

Chinese stimulus measures announced on September 24 found few structural optimists in the global macro community, us at BCA Research included. This is for good reason. China is mired in secular stagnation that cannot be unstuck by monetary policy alone.

US crude oil output has not peaked. It will continue to increase. A continued expansion of US production, even if it is moderate, along with a possible increase in OPEC+ output, will lead to an oversupplied oil market. Moreover, we expect the demand headwind from the business cycle slowdown to weigh on crude prices. Over a 6-to-12-month horizon, the path of least resistance for oil prices is to the downside.

Special Report

Macro regimes defined by different methodologies may share similar names but can vary significantly in terms of regime distribution and persistence. Such differences have caused confusions when it comes to analyze how equity factors perform at different stage of the cycle. In this report we propose three criteria to evaluate three regime classification methodologies and provide suggestions to asset allocators.

Just like the market for Oasis 2025 reunion tour tickets, the US labour market is ‘supply-constrained’. This means the US will not go into a GDP recession in the next few months and has a good chance of cheating one for longer. Without a GDP recession, there is unlikely to be an economy-wide profits recession. This leads to three recommendation changes on a cyclical (12-month) horizon which we highlight. Plus: the tactical rally in Chinese stocks can continue.