Latest from BCA Research

In this note, we preview the Q1-2024 earnings season, give our take on expectations and share what we will be watching.

Unlike most advanced economies that are flirting with recession due to weak demand, the ‘inverted’ US economy is motoring along due to strong supply, from a combination of surging labour participation and surging immigration. We go through the implications for stocks, bonds, interest rates, and the dollar. Plus: IXJ, PEP, and MCD are good tactical outperformance candidates.

Special Report

This year’s cash for clunkers program will have only a mildly positive impact on domestic demand for automobiles and home appliances in China. In the meantime, the equipment renewal program will prop up domestic manufacturing moderately as well as help the country reduce its reliance on high-end equipment imports. We recommend continuing to overweight onshore auto stocks relative to the A-Share Index.

In the near term, favor oil and oil producers outside the Gulf Arab states. Over a 12-month horizon, favor US and North American equities, defensive sectors over cyclicals, and safe-assets. Within cyclicals, stick to energy and defense.

Special Report

The Telecoms industry is highly concentrated, and carriers compete on price and quality of service in a slow growing market. Demand for capex is relentless. The roll out of 5G has disappointed. Recently, capex outlays have slowed, and operating cash flow has rebounded. Further, Telecoms is a quintessential defensive industry that will outperform during a market pullback.

Bank Credit Analyst

Stay overweight US equities versus world, long US energy sector versus Middle East stocks, and long Canada and Mexico versus global-ex-US stocks.

Stay overweight US equities versus world, long US energy sector versus Middle East stocks, and long Canada and Mexico versus global-ex-US stocks.

In the short run, global risk assets are vulnerable due to rising oil prices and bond yields. Cyclically, a global economic downturn will weigh on global risk assets.

We look beneath headline data to assess the state of the labor market in cyclical goods-producing industries that have previously led overall nonfarm payrolls and in the services segments that have recently been leading the charge. The bottom-up view looks a lot like the top-down view: the labor market is softening, but very slowly, and offers no indications that a recession is at hand.

EUR/USD collapsed in the wake of last week’s hotter-than-expected US CPI report. Is this pessimism warranted and will the euro’s trading range that has prevailed since 2023 breakdown?