Latest from BCA Research
The economy remains resilient despite a softening labor market. As the economy shifts from labor toward capital, we may be in the early stages of a “jobless boom.” Our bull case for equities rests on strong earnings growth, accelerating GenAI adoption, monetary easing, and stimulus from OBBBA. Key risks we continue to monitor are rising bond yields and the threat of stagflation.
The K-shaped economy aptly describes the bifurcation between low- and high-end households but it’s not something investors should celebrate if they want the expansion to continue.
In this update, we apply our Macro Surprises framework to equities for the first time. Overall, the message is broadly consistent with our current equity views: Investors should favor Eurozone equities and continue to overweight cyclical sectors relative to defensive ones.
The US High Quality (USHQ) portfolio underperformed its benchmark through September, returning 3.01%, whilst its SPY benchmark returned 3.91%. However, our US High Quality SMID (USHQ SMID) portfolio continues to show strength, with another solid month of performance. The portfolio returned 2.69%, outperforming its MSCI US Mid Cap benchmark by 169bps.
A short guide on how best to use and interpret our real-time fractal heatmap for asset allocation.
The CNY/USD has room to appreciate both cyclically and structurally, while nominal yields on China’s long-duration government bonds are set to fall. This combination supports Chinese equities.
Big Tech and the Trump administration are engineering an industrial boom that favors American hardware over American workers. Economic growth will be robust in the US but the labor market will stay relatively sluggish. Adopt an overweight stance on both equities and fixed income and underweight on cash. Upgrade Canadian equities and downgrade the UK. Upgrade Industrials and downgrade Consumer Staples. Upgrade EM Debt. Downgrade Private Credit.
MacroQuant is neutral-to-slightly positive on stocks on a tactical 1-to-3 month horizon but sees downside risks over a longer-term horizon. Its favorite equity sectors are communication services and IT. Regionally, it prefers EM and US equities. The model is bullish on duration. It remains bearish on the US dollar. It is upbeat on gold and copper but is slightly negative on oil.
US Real Estate has been under pressure post-2022. This chartpack offers a snapshot of the cap rate cycle across measures, sectors, and cities. Industrial and Multifamily spreads remain tight while Office and Retail have peaked. Chicago and Houston differ as cities, but their Real Estate trends look increasingly alike.