Latest from BCA Research
On the one hand, US tariffs are much more deflationary for the rest of the world than for the US, so interest rate differentials might move in favor of the US dollar in the near term. On the other hand, portfolio outflows from the US will weigh on the greenback over a cyclical horizon. We recommend buying Mexican and Central European domestic bonds.
The US High Quality (USHQ) portfolio outperformed its benchmark in March, despite realizing a negative return. USHQ returned -2.6%, whilst its SPY benchmark returned -3.9%. Over a trailing-quarter basis, USHQ posted meaningful outperformance vs. benchmark, generating +230bps of excess return, while also exhibiting lower volatility and a smaller drawdown.
Tariffs will make a difficult job almost impossible. Hitting and sustaining a precise 2 percent inflation target is more about luck than judgement. It requires both the starting point for inflation expectations and any inflation/deflation shock to combine perfectly to 2 percent. While structural inflation expectations in the euro area and Japan could be close to 2 percent, those in the US and the UK will be stuck uncomfortably above 2 percent. We discuss the investment implications for rates and FX. Plus: gold is vulnerable to a tactical reversal.
Trump's Tariff D-Day brings a negative surprise to financial markets already anxious over a declining US cyclical economy. Investors should sell risky assets, increase safe havens, and overweight US assets in the near term.
The White House has revealed the plans for Liberation Day. They broadly include: Reciprocal tariffs, on a case-by-case basis. A message from President Trump to other countries to lower their own tariffs and buy US goods. Our take is that April 2 will be remembered – 6-12 months from now – as the peak in “de-globalization” thesis. Markets react to the delta of bad news, not bad news in the absolute.
Liberation Day is coming to America! In honor of the new holiday, GeoMacro will be increasing prices using an algorithm that will determine how much each client owes us for the sweet taste of their liberty (… from the clutches of normative geopolitical analysis)!
The trade war is on everyone’s mind with America’s “Liberation Day” upon us! However, the reality under the surface is that the main macro narrative has been a rotation – nay… exodus – out of US assets into RoW. This was not supposed to happen with de-globalization and a MAGA trade policy. US assets – form equities to the USD – were supposed to be the safe haven from “America First” policies by Donald Trump. Meanwhile, the noose of material constraints is tightening around Trump, suggesting that a pivot away from brinkmanship may not be long away from “Liberation Day.”
In this month’s Beta report, we continue our series supporting our bullish thesis on Europe. We take a deep dive into the aftermath of the European energy crisis – dispelling the myth that Europe faces risks of imminent deindustrialization – and evaluate the impact the approaching LNG wave will have on European industry and the global natural gas market.
Trump’s foreign policy has been the focus for investors over the past few months. But is it really the underlying cause of the selloff? Market dynamics suggests that tariffs have only been a catalyst. In our view, investors should not focus on the man – Trump and his policy preferences – but should instead focus on the macro. Specifically, we outline three trends that will matter over the cyclical horizon: valuation and policy differences between the US and the rest of the world, the collapse of US animal spirits, and how the AI narrative has begun to crack. While markets could whipsaw around “Liberation Day,” this will only be the opening salvo of the negotiations. We believe that investors will be better served by focusing on these three forces – none of which are positive to risk assets. Remain defensively positioned.