Latest from BCA Research
An outlook for inflation and Fed policy following this morning’s CPI report.
The stratospheric valuation of this year’s AI mania is likely to deflate, just as it did after the Web 1.0 mania of the late 90s. We go through some long-term and short-term investment implications.
The Politburo meeting in late July will set the course for economic policy for 2H23. We think China will only resort to "irrigation-style" stimulus if something breaks in the economy and/or financial markets. Furthermore, the gradual and targeted rounds of stimulus are unlikely to boost economic activity considerably. The reasons are the diminished efficacy of the monetary transmission mechanism and the unique features and constraints of the nation’s fiscal system.
Positive economic surprises have delayed the onset of recession in the United States. But tighter monetary and fiscal policy, slowing global growth, and a looming rebound in policy uncertainty and geopolitical risk suggest that investors should buy insurance while it is cheap.
A perspective on the recent increase in US bond yields and this morning’s employment report.
Value, Quality, and Size all ticked up as the market rally broadened in June, however the BCA Score was held back by an underperformance in Safety. Despite this, the USHQ SMID portfolio outperformed its benchmark.
In this short weekly report, we review some of the most common questions clients asked us in the last few weeks.
On one hand, China will be exporting deflation to the rest of the world. On the other hand, core inflation is sticky in the US, making the Fed err on the hawkish side. Altogether, these crosscurrents are creating a toxic mix for risk asset prices.