CoreMacro
BCA’s flagship global macro and investment strategy platform, helping investors anticipate regime shifts, connect signals across regions and asset classes, and navigate the world’s most difficult macro questions.
The large buildup in Chinese households’ savings deposits is unlikely to fuel consumption. Poor outlooks on labor market conditions, income, and households’ unwillingness to borrow will hinder consumption through the rest of 2024.
The signs of an approaching recession are starting to emerge. We will turn tactically defensive once they all fall into place.
Looking at economic activity, global monetary policy seems restrictive, however, the behavior of financial markets tells a different story. What gives?
There is a path to a soft landing, but it is a narrow one. We estimate that there is only a 20% chance that the US will avoid a recession before the end of 2025. We are currently neutral on global equities, but expect to downgrade stocks to underweight during the summer.
The RMB 500 billion program is small, as it is equivalent to only 4% of property developers' total funding from the past 12 months. This will preclude a recovery in property construction this year. Corporate profits will determine the path of China’s share prices on a cyclical time horizon. Deflation in China will persist for now, which will depress corporate profits even if volumes grow modestly.
The economic schism in the world economy, between the non-US developed economy in recession and the US in strong growth, is unprecedented during our lifetimes. Now the schism will continue in reverse, as the non-US developed economy rebounds while the US fades. There are important implications for rates, the dollar, and sector and regional equity allocation which we discuss. Plus: base metals are a tactical short.
ASEAN stocks and currencies will weaken further as these economies face multiple headwinds. Raising policy rates did not stop a sliding currency in the past, it is unlikely to do so now.
