Latest from BCA Research

We unveil the ‘Joshi rule’ real-time recession indicator as a much better version of the Federal Reserve’s own ‘Sahm rule’. And we identify what would trigger these recession indicators in this week’s and future US jobs reports. Plus: airlines, soybeans, and tin are all good rebound candidates based on their collapsed short-term complexities.

The Global Equity Score went up slightly; however, it still maintains a neutral stance. The sector model favors Energy, Technology, Consumer Discretionary, and Communication Services. The Style indicator is leaning towards Large Cap - Value stocks.

We present our Portfolio Allocation Summary for October 2023.

MacroQuant is overweight equities, underweight bonds, and neutral cash.

Downside risks to equities are building. Rates, the dollar, and energy prices will remain elevated into yearend. This trifecta makes a soft landing less likely than before and hurts corporate profits and multiples. However, high cash balances may offer downside protection against a sharp correction.

Aggressive monetary tightening has always led to recession, although the timing is uncertain. The effects of high interest rates are starting to be felt. Investors should stay risk off and buy government bonds as a safe haven investment with carry.

Special Report

Introducing our Special Series to assess where Portugal, Italy, Greece, and Spain stand today. Stay tuned for more.

Special Report

After a busy month of global central bank meetings, and rising global bond yields, it is a good time to update our suite of Global Central Bank Monitors to assess the likely next moves from policymakers. The signal from the Monitors in all countries (outside of Japan) is consistent with the “on hold but higher for longer” messaging from major central banks like the Fed and the ECB. Only our Bank of Japan Monitor stands out as clearly signaling the need for tighter monetary policy.

Bank Credit Analyst

Bank Credit Analyst

In Section I, we note that the recent surge in long-maturity government bond yields is symptomatic of a sharp reduction in market expectations for a soft-landing economic outcome. This underscores that the US and other developed market economies are on an ultimately recessionary path. We also discuss why the S&P 500 is likely to fall to between 3300 and 3700 in a recessionary scenario, and how OPEC 2.0’s production cuts will, at a minimum, reduce the odds of pre-emptive rate cuts. In Section II, we revisit the economic outlook for Canada, looking for signs that one of the most indebted economies in the world is buckling under the weight of tight monetary policy. We do find evidence suggesting that mounting debt service is already impacting Canadian consumers, and we expect to see a continuation of weak/weakening consumer spending in Canada so long as the current stance of monetary policy is maintained.