Latest from BCA Research
Following today’s US jobs data release, the Joshi rule real-time US recession indicator inched up to 0.18 and is now just a whisker from its recession event-horizon of 0.20.
The sector model continues to favor IT and Consumer Discretionary stocks and downgraded Industrials. We also take a deeper look into the exceptional performance of our Value L/S factor and find weakness in small-to-mid cap growth stocks.
A soft landing can be achieved but not maintained. We are cutting our tactical recommendation on stocks from overweight to neutral and scaling back our long-duration stance.
The attacks on Red Sea commercial tankers by Iran’s Yemeni proxies, the Houthi movement, are an inflation risk inasmuch as they lengthen voyage times for any shipping forced to avoid the Bab el-Mandeb Strait. The risk of an expansion of these attacks is, in our view, limited, given Iran’s inability to project naval power in the region.
MacroQuant has upgraded equities to overweight at the expense of bonds. Cash remains neutral.
The market is excited by the idea that the Fed will cut rates early this year, even without a recession. But is that likely, with inflation still set to be around 2.8% mid-year?
A post-mortem of our trades for the year, and also comments on future yen and sterling moves from the recent BoJ meeting, and the UK inflation report.
In this final note for the year, we take profits and close several long-term investment positions: Overweights in Insurance and Commercial Services, and underweights in Utilities, and Retail and Commercial REITs.
