Latest from BCA Research

In this report, we review what our technical indicators are telling us about the G10 currencies.

Strong growth in the US and large EMs ex-China will translate into higher oil demand in 2024 – 2025. With mostly unchanged oil supply, tighter markets will ensue. We’ve raised our 2024 average Brent forecast to $98/bbl, and expect $105/bbl in 2H24. In 2025, we expect Brent to average $110/bbl. Prices could easily move higher, if the US moves against one or all of the states enjoying US sanctions forbearance – Russia, Iran, Venezuela. If Brent trades through $110/bbl, Saudi Arabia and the UAE will release spare capacity.

Our quant models suggest Democrats are still slightly favored for the White House. Our Senate model favors Republican control, though Montana and Ohio are the weak links that could deliver Democrats a de facto Senate majority in the event they keep the White House. But there are still six months before the vote. An oil shock from the Middle East or other negative economic news would force a major change to these models.

In this note, we preview the Q1-2024 earnings season, give our take on expectations and share what we will be watching.

Unlike most advanced economies that are flirting with recession due to weak demand, the ‘inverted’ US economy is motoring along due to strong supply, from a combination of surging labour participation and surging immigration. We go through the implications for stocks, bonds, interest rates, and the dollar. Plus: IXJ, PEP, and MCD are good tactical outperformance candidates.

Special Report

This year’s cash for clunkers program will have only a mildly positive impact on domestic demand for automobiles and home appliances in China. In the meantime, the equipment renewal program will prop up domestic manufacturing moderately as well as help the country reduce its reliance on high-end equipment imports. We recommend continuing to overweight onshore auto stocks relative to the A-Share Index.

In the near term, favor oil and oil producers outside the Gulf Arab states. Over a 12-month horizon, favor US and North American equities, defensive sectors over cyclicals, and safe-assets. Within cyclicals, stick to energy and defense.

Special Report

The Telecoms industry is highly concentrated, and carriers compete on price and quality of service in a slow growing market. Demand for capex is relentless. The roll out of 5G has disappointed. Recently, capex outlays have slowed, and operating cash flow has rebounded. Further, Telecoms is a quintessential defensive industry that will outperform during a market pullback.

Bank Credit Analyst

Stay overweight US equities versus world, long US energy sector versus Middle East stocks, and long Canada and Mexico versus global-ex-US stocks.

Stay overweight US equities versus world, long US energy sector versus Middle East stocks, and long Canada and Mexico versus global-ex-US stocks.