CoreMacro

While the FOMC was more dovish than expected, rising inflation may cause the Fed to escalate hawkish rhetoric. The bounce in oil should help high-beta stocks. Underweight U.S. equities versus Europe, Japan and H-shares. We estimate U.S. equities will deliver returns of 4%, ann. over the next 10 years, vis-à-vis 9% for the euro area and Japan, and 14% for H-shares. Central banks have more options to combat any possible debt-deflation spiral in Europe/Japan/China than is often recognized.

Special Report

Most of the economic arguments in favor of the U.K. leaving the EU do not carry much weight, as we discuss in this collaboration between BCA's Geopolitical Strategy and European Investment Strategy. However, the probability is a coin toss - much higher than investors tend to think. We review the geopolitical and investment implications of the "Leave" and "Remain" scenarios.

If the EM rally is sustained, the Fed will once again become resolute in its commitment to hiking interest rates. This in turn will spur another relapse in EM risk assets. Chinese policymakers are attempting to juggle contradictory objectives without a clear and realistic plan of action to resolve existing problems.

A Chinese reflationary cycle is unfolding. Capital spending is showing signs of regained vigor, driven by both housing and infrastructure. Chinese PPI deflation will ease further. This will help reduce balance sheet stress of materials producers and boost overall industrial profits. Remain positive on Chinese investable stocks.

Bearish sentiment, higher oil prices and Chinese policy stimulus leave room for a continued bounce in stock prices. But this rally is unlikely to prove sustainable.

Special Report

This week we are publishing a speech given by Chinese finance minister Lou Jiwei, which is highly relevant and informative in understanding the economic logic of Chinese leadership.

Cutting through the hype that will surround policy initiatives today, the ECB is caught between a rock and a hard place. We explain why, and what it means for investors.

Special Report

This week's report is guest-authored by my colleague, Marko Papic, BCA's Chief Geopolitical Strategist. In a highly controversial piece, Marko argues that Donald Trump's strategy of focusing on the concerns of white working class voters may represent the GOP's best hope for winning this year's presidential election. As such, we expect the political debate to remain highly charged over the coming months, possibly to the detriment of risk assets.

Expectations of a deepening EM/China growth slump and RMB depreciation have been the key to the selloff in global risk assets. There is no basis for these expectations to improve. Therefore, there are few fundamental reasons for EM and global risk assets to rally much further. Stay put. In Brazil, the impeachment rally is unsustainable and will reverse sooner than later. Stay short Brazilian risk assets.

The relief rally is not over, and could benefit from commodity and currency market movements. Oil prices likely are banging out a bottom. In general, however, a healthy dose of caution is warranted. Our bias is to sell into, rather than chase, rallies in risk assets.