Latest from BCA Research

European inflation has further downside and core CPI will soon begin to fall too. However, European growth will remain soggy in Q2. What does this environment mean for investors?

In this week’s review, we look at recent data and its impact on currency markets.

Is there a lot of cash on the sidelines ready to be deployed? Would the US recession not be bearish for the US dollar and help EM like it did in the early 2000s? Why can the US investment playbook of the past 15-25 years not be used in this cycle?

In the aftermath of the bank failures in the US, the outperformance Quality and Safety overpowered the underperformance of Value resulting in a moderately positive month for the BCA Score L/S and the USHQ SMID cap portfolio. The USHQ Large Cap portfolio underperformed in growth sectors as investors pulled rate cut expectations forward.

Eventually South Africa will do its macro rebalancing the least painful way: via adjustments in nominal variables such as prices and currency, rather than in real variables such as jobs and incomes. That entails a much weaker rand in future.

Special Report

In this Special Report, BCA Strategist Ritika Mankar highlights that Japanese savers own foreign assets to the tune of a staggering $6.5 trillion today. As implausible as it may seem today, the rate cycle in Japan will turn later this decade. Once it does, Japanese savers will sell down their global assets – a dynamic that is likely to kick up a storm.

Tight monetary policy will suppress copper capex. Loose fiscal policy, which is lavishing stimulus on energy and defense firms, will stoke copper demand. Constrained copper supply and turbo-charged demand will feed into headline inflation. If the CCP adopts large-scale monetary stimulus to break its liquidity trap, inflation pressures will rise. This global policy mix will bolster oil and gas demand well beyond the 2050 target for net-zero emissions, given the long lead times to bring new copper supply online. We remain long the XOP and XME ETFs, and the COMT ETF to retain exposure to tightening supplies and rising demand for copper and oil.

Special Report

When complexity collapses, it is a red flag for impending tail-events, heart attacks, and reversals in the markets. We describe how to measure complexity, how to spot the red flag that it has collapsed, and list some investments that are approaching potential turning-points.

Bullish equity sentiment may persist in the second quarter on the Fed’s pause, but tight monetary policy, financial instability, elevated recession odds, extreme US polarization and policy uncertainty, and still-high geopolitical risk should encourage investors to maintain a defensive position for the coming 12 months.

The Global Equity Score, while bearish, increased this month resulting in an upgrade to Technology and Materials Sector Scores. The BCA Style score now favors small cap growth.