CoreMacro

We are closing our tactical long position in the S&P 500 that we initiated on April 8th at a S&P 500 index level of 4983 in the report Tactical Buy Triggers Activated | BCA Research.

Are bunds the new Treasurys? The euro and German debt are gaining favor as safe havens, but markets may be overplaying the shift. Our latest report dissects what's durable, what's not, and how to trade the dislocation.

Although the sell-off in the US dollar and relative outperformance of non-US stocks will pause over the coming months as a global recession begins, the fading of US exceptionalism will still cause the dollar to weaken and US stocks to underperform over a multi-year horizon.

Bessenomics has failed so far. The key pillars of Bessent’s policy mix – achieving lower interest rates and robust economic growth – have been severely jeopardized. The US dollar has depreciated for different reasons than Bessent had envisioned and has pushed up long-term US bond yields. A trade deal between the US and China will likely come too late to preclude a major downshift in global growth.

Amid the storm of global financial uncertainty, Argentina stands out as a free-market safe haven. The lifting of currency controls was the last step taken by this country to embrace market mechanisms. We recommend that investors buy Argentine equities, sovereign credit, and domestic bonds, and overweight Argentina within EM equity and fixed-income portfolios.

The European economies are facing a major deflationary shock. We recommend that investors stay long a basket of Central European (CE3) domestic bonds. They should also upgrade CE3 bonds and stocks in their respective EM portfolios.

The policy-induced decline in consumer confidence has spread to businesses and investors, increasing the probability of a recession even if the administration reverses field on its aggressive tariff measures. We reiterate our defensive asset allocation recommendations.

Special Report

Upgrade the odds of a full-scale war in the Taiwan Strait from 5% to 10%. Rapid escalation of US-China economic war raises the probability of tensions spilling into the military-strategic domain. Investors should buy insurance against this tail risk while it is cheap. Meanwhile, use this year’s trade shock and equity volatility to increase allocation to EM manufacturing states.

Europe’s deflation problem is getting harder to ignore. This week’s ECB cut is just the beginning — tariffs, the euro’s rally, and softening demand all point to more easing ahead. We explain what it means for yields, equities, and EUR/USD.

The textbook impact of the world’s largest goods importer, the US, imposing an ultra-high tariff on the world’s largest goods exporter, China, is for global goods prices to FALL. Thereby, while Trump’s tariffs will be inflationary for the US they will be DEFLATIONARY for Europe. We go through the implications for rates, bonds, stocks, and FX. Plus: tactically underweight global utilities (JXI); and tactically buy TGT.