Latest from BCA Research
We discuss the implications of this morning’s CPI report and the relative attractiveness of 2/5 Treasury curve steepeners.
Disinflation continues to unfold globally, and markets are finally catching up. Inflation expectations have broadly realigned with fundamentals, prompting us to shift our global ILB allocation to neutral. While tariff risks are inflating US expectations, pricing in the UK, Japan, and Australia has adjusted sharply. Today’s Strategy Report reviews these developments and updates our country-level ILB positioning.
A potential right-wing government in 2027 will not stabilize the trajectory of the public debt-to-GDP ratio. Unsustainable public debt, a large current account deficit, and a sharp growth slowdown will lead Brazilian markets to underperform EM. Yet, to benefit from a quickly decelerating economy, we recommend receiving 2-year swap rates.
We still believe a recession looms, but it has yet to rear its ugly head. We continue to recommend investors position defensively, but we will change tack if clear signs of a recession don’t emerge soon.
EUR/USD is in a multi-year bull market. A short-term pause is likely, but the longer-term trend remains higher toward 1.25, and eventually 1.40.
This week our three screeners identify equity plays on copper prices, stocks that are considered “boring” but are solid earners during heightened uncertainty, and stocks which are positively correlated with Bitcoin.
In this chartbook, we look at the balance of payments across DM and EM countries. The US does not fare well, but neither do a few other countries.
We will abandon our recession call if US economic data show clear signs of stabilization over the summer months. For now, that has not happened. Maintain a modest underweight to stocks but look to get more defensive if MacroQuant’s equity z-score falls below -1.
