Latest from BCA Research

On their third quarter earnings calls, the largest banks indicated that their household and business customers remain in surprisingly robust shape. We interpret their observations as supporting our constructive near-term take on the economy and financial markets.

Bank Credit Analyst

Who will win the 2022 World Cup in Qatar? What are the important narratives around the teams? And how have major macro trends affected the world of football? Find out in the 2nd edition of the BCA FIFA World Cup Forecasts.

Is a Plaza Accord 2.0 necessary? If so, why? If not, what could stem the rise in the dollar, or will it continue to overshoot? In our view, there are fundamental reasons not to bet on a new accord, but that does not necessarily help with investment strategy.

Special Report

The Fed’s asset sales are unlikely to lead to an additional outsized impact on long-maturity government bond yields beyond what expectations for the path of the fed funds rate would justify. However, the stance of monetary policy has tightened substantially over the past year, and is set to tighten even further over the coming several months. As such, investors should be focused less on the ostensibly unknown risk from the Fed’s balance sheet reductions and more on the known risk of conventional policy tightening, which is currently quite acute.

Monetary and energy policy errors will keep oil- and gas-price volatility elevated. This will continue to weaken capex in conventional and renewable energy. Headline inflation will remain elevated. We remain long the XOP ETF, to retain exposure to the equities of oil and gas producers, which will benefit from these policy errors.

Special Report

There has been an unprecedented divergence between global and Chinese thermal coal ("coal") prices since the Russia-Ukraine war commenced in February 2022. Such a wide price gap is unsustainable. This price convergence will continue, with international prices falling faster than Chinese ones.

Indonesian equity outperformance was predicated on an unprecedented trade windfall, including coal exports. As that fades, both the stocks and the currency are highly vulnerable.

Is the US in a wage-price inflation spiral that could lead to more aggressive Fed rate hikes? Is it time to buy UK Gilts after a wild month of volatility? We answer "no" to both questions, as we discuss in this week’s report.

The Fed’s tone has taken a decidedly dovish turn during the past week and, despite September’s hot CPI print, there is mounting evidence that a period of disinflation is coming. This makes the case for a pause in the Fed’s tightening cycle in Q1 or Q2 of next year.

Banks face many challenges from a slower economy and tighter financial conditions, which offset benefits from rising rates and higher net interest income. It is likely that things will get worse, a sentiment supported by many banking executives. However, negative expectations have already been priced in. We will maintain our overweight for now but will fade this position after a bounce in the next bear market rally. The long-term outlook is negative. We prefer Regional Banks to Diversified Banks.