Latest from BCA Research
An update to our US bond strategy following this morning’s employment report.
In this report, we explore some trading opportunities after a volatile few weeks for FX markets.
India’s intake of industrial commodities is 10-to-20 times as small as China’s. Capital goods are five times as small. Hence, India is not in a position to offset any decline in Chinese demand for these commodities and goods.
The EU’s transition to a carbon tax launched this week via its Carbon Border Adjustment Mechanics (CBAM) will lead to higher inflation in the medium term (3 – 5 years out), and will stoke consumer (i.e., voter) antipathy if it becomes effective in 2026. As a result, the tax will be watered down. Food and energy prices are particularly at risk, as imported fertilizers, and electricity-generation and -transmission components made from steel and aluminum are affected by the CBAM. We remain long oil, gas and metals equity exposure via the XOP, XME and COMT ETFs. We also remain long gold to hedge inflation.
Both USHQ portfolios outperformed their benchmark and the BCA Score L/S posted its best month of the year. In fact its one-month return in the top decile of all monthly returns. The BCA Score is constructed to provide downside protection in times of turmoil, and last month was no exception.
There is a connection between the bond market meltdown and Republican Party’s meltdown. Investors should expect more short-term financial market volatility as a result of the triple whammy of high bond yields, high oil prices, and a strong dollar.
We unveil the ‘Joshi rule’ real-time recession indicator as a much better version of the Federal Reserve’s own ‘Sahm rule’. And we identify what would trigger these recession indicators in this week’s and future US jobs reports. Plus: airlines, soybeans, and tin are all good rebound candidates based on their collapsed short-term complexities.
The Global Equity Score went up slightly; however, it still maintains a neutral stance. The sector model favors Energy, Technology, Consumer Discretionary, and Communication Services. The Style indicator is leaning towards Large Cap - Value stocks.
