CoreMacro

We should fear a recession in the frothy parts of the US stock market much more than a recession in US GDP. And as frothy US tech stocks sell off, an excellent hedge is to go long JPY/GBP or JPY/EUR.

Special Report

Today, we are sending you a report recently published by BCA’s Emerging Markets Strategy service titled Little Cash On The Sidelines. Arthur Budaghyan, Chief EM/China Strategist, argues that “cash on the sidelines” in the US is low relative to the market value of investable US securities in general, and US equities in particular.

A major slowdown in nominal growth was behind Indonesia’s recent stock underperformance. Dedicated EM equity portfolios should upgrade Indonesian stocks from underweight to neutral. We also recommend a new relative trade: go long Indonesian banks / short EM banks.

Investors hope that the ECB rate cuts priced into the curve will be sufficient to achieve a soft landing in Europe. History argues against this view, but will this time be different?

Special Report

In this Special Report, Jonathan LaBerge of The Bank Credit Analyst argues that the Fed should abandon the framework changes that it made in 2020, both to its inflation and employment objectives. If “structural dovishness” is made a permanent feature of Fed policy, investors can expect more frequent booms and busts in financial markets, and higher odds of future inflation overshoots.

This report provides our framework for interpreting the messages from last week’s Third Plenum, and the potential implications for the economy and investors.

“Cash on the sidelines” as a share of the US equity market cap has declined to a record low. This is true for investable funds of both households and investment firms. Hence, there is little firepower left to sustain the equity rally.

It’s status quo for the SIFI banks, as they don’t see consumer credit performance materially worsening from now-normalized levels and they are not meaningfully exposed to commercial real estate losses.

As Trump’s victory odds rise, the underperformance of European equities deepens. How negative would a global trade war be for European assets?

Don't buy the dip. The equity bull market is over. The US will enter a recession in late 2024 or in early 2025.