Latest from BCA Research
China’s economy is cruising at a very low altitude where gravity forces are intense. Downbeat consumer and business sentiment will reduce the effectiveness of stimulus. Anything short of “irrigation-style” stimulus will be insufficient to boost growth. We remain cautious on Chinese stocks. Onshore bond yields will drop to an all-time low. The RMB is still vulnerable against the USD in the next few months.
In this report, we present our performance review of the BCA Research Global Fixed Income Strategy (GFIS) model bond portfolio for the Q2/2023, and the outlook and scenario analysis for the next six months. The portfolio return exactly matched that of the benchmark index during the quarter, as modest gains on government bond allocations in the US, UK and core Europe completely offset losses on spread product underweights. Looking ahead, the portfolio is positioned to capitalize on an expected slowing of global growth over the rest of the year through an overweight stance on government bonds versus spread product and above-benchmark duration tilts in the US and core Europe.
We see challenges ahead for Global Buyout across geographies as valuations need further resetting. While we are concerned with capital controls and flight risk in Asia-Pacific Venture Capital, the upside potential from AI may be worth a look. The current entry point for Private Credit is opportune across North America and Europe with the distressed pipeline building. Real Estate does not look appealing with the macro and relative opportunity set driving our underweight. Hedge Funds have a favorable backdrop in the near-term, although prospects differ across Directional, Diversifier, and Crisis Risk Offset strategies.
Banks mostly surprised with earnings beats for Q2-2023, lifting broad and regional bank stocks alike. Despite prevailing macro headwinds, banks are cheap and oversold, supported by better-than-expected earnings. A broadening of the rally supports further upside to the industry. Move to overweight banks over a tactical horizon.
Although not our base case, there is a path for the US economy to avoid a recession over the next few years. We see the risks to stocks as tilted to the upside in the near term but to the downside over a 12-month horizon.
In this report, we evaluate the breakdown in the dollar and next moves in the DXY, based on fundamentals, historical precedents, and technical patterns over the last few years.
In this report, we evaluate the breakdown in the dollar and next moves in the DXY, based on fundamentals, historical precedents, and technical patterns over the last few years.
The looming risk of an economic downturn, geopolitical risk and inconsistent government policy are feeding commodity markets with volatility, additional to the market specific uncertainty-generating factors. Amidst heightened event-based uncertainty and a possible general economic deterioration, investors will pay more attention and react to events, increasing overall uncertainty levels, which in turn will further fuel commodity price volatility. Commodity producers will be disincentivized from making future supply investments against heightened price volatility and policy uncertainty.
Cybersecurity costs continue to climb, which compels companies and governments alike to increase spending on cybersecurity to bolster digital protection. This will boost sales of companies in the cybersecurity ecosystem. While performance of the cybersecurity cohort may be volatile over a short investment horizon, it has significant long-term investment potential. Cybersecurity is a USES strategic investment theme.