CoreMacro

Corporate profits are more sensitive to selling prices than to volumes. Falling prices even amid mildly rising volumes could produce a meaningful profit contraction. Stay with deflation trades. In particular, maintain the short EM stocks / long U.S. 30-year Treasurys position. Indian stocks are still pricey and will deflate further in absolute terms.

There are no signs of broader financial stress in the Chinese corporate sector. The most recent financial market turmoil has had no systemic damage to corporate sector balance sheets. We are leaning against being overly bearish. Current valuation readings, particularly for Chinese H shares and Hong Kong stocks, on a historical basis have never been sustainable.

Equity selloff alone will not catch the Fed's eye unless there is an outright crash.

Special Report

Taiwan's opposition Democratic Progressive Party is poised to win the presidency and possibly the legislature in elections January 16. The result will be icier cross-strait relations in the coming years that will add a geopolitical headwind to Taiwanese assets, even as it struggles to cope with a low-growth world. Taiwan still has advantages over other emerging markets, but its outlook is darkening.

Special Report

We are proud to announce the launch of our Equity Trading Strategy (ETS) service. This new service ranks every publicly-listed stock in the U.S. according to a sophisticated model that combines over 30 stock market anomalies - all with the aim of finding stocks that will deliver outsized returns. By providing individual stock rankings, ETS enables you to leverage BCA's macro views and apply them at the stock level. Our easy-to-use web application will allow you to quickly generate and validate investment ideas. More importantly, by picking top-ranking stocks, you will be able to generate higher long-term returns. The attached Special Report discusses the theoretical underpinnings of the model which has been in development for the past 15 years. We trust that this new service will be greatly beneficial for equity investors, and we hope you will find this report both valuable and insightful.