Latest from BCA Research

Bank Credit Analyst

In Section I, we argue that global investors have been lulled into a false sense of security concerning the resiliency of the US economy. Tight monetary policy means that something must change for a recession to be avoided, and developed market rates cuts will likely be too modest and come too late to save the day. Nimble investors or those highly sensitive to tracking error should not be underweight stocks over the coming 3-6 months. Over a 6-12 month time horizon, we continue to recommend that investors remain underweight global equities versus US$-hedged long-maturity developed market government bonds. Section II is a guest report written by Martin Barnes, BCA’s former Chief Economist. Martin revisits the idea of the Debt Supercycle and discusses how its true end may emerge in response to a fiscal crisis in the US over the coming few years.

Bank Credit Analyst

In a guest research report, Martin Barnes, BCA’s former Chief Economist, revisits the idea of the Debt Supercycle and discusses how its true end may emerge in response to a fiscal crisis in the US over the coming few years.

Favor defensive sectors, low-beta assets, and long-duration bonds until the election uncertainty is lifted one way or another over the next five months.

The large buildup in Chinese households’ savings deposits is unlikely to fuel consumption. Poor outlooks on labor market conditions, income, and households’ unwillingness to borrow will hinder consumption through the rest of 2024.

Special Report

Historically, the biggest driver of the small cap premium was “migration” i.e., a subset of small stocks earning extreme positive returns as they become large stocks. However, migration rates between small and large stocks have declined in the US. Small companies that would have grown to become successful large caps are either staying private, getting acquired by larger companies, or are entering public markets when they are already large caps. As a result, only the very worst companies are left in the small cap space. Investors should avoid a structural passive allocation to US small cap indices.

Special Report

In this Special Report we assess the absolute and relative attractiveness of developed market government bonds using several fair value models. Longer-term investors who are focused on value should overweight US long-maturity bonds, and favor Spanish, Australian, and potentially UK government bonds within a DM ex-US allocation.

Special Report

We recommend overweight in Pharma over a tactical and strategic investment horizon, as challenges, that have recently hampered the industry group’s performance, are dissipating. Likely election outcomes are positive for the industry, while major trends like generative AI applied to drug development and an aging population are long-term tailwinds.

The signs of an approaching recession are starting to emerge. We will turn tactically defensive once they all fall into place.

Looking at economic activity, global monetary policy seems restrictive, however, the behavior of financial markets tells a different story. What gives?

Special Report

Nonfinancial corporate balance sheets are generally in good shape, but there are signs of deterioration at the bottom-end of the credit spectrum. We present evidence showing that credit deterioration at the bottom-end of the credit spectrum has a habit of migrating upwards.