Latest from BCA Research

Relative to beaten-down expectations, global growth will surprise on the upside in 2023. Investors should overweight equities for now but look to turn more defensive in the second half of the year.

MacroQuant Global Equity Score is bearish but increasing and the sector model upgraded Materials shifting the cyclical/defensive tilt closer to neutral.

MacroQuant is underweight equities and overweight bonds and cash.

The European Commission risks retarding the development of long-term contracting for renewable energy just as momentum is building. Policy uncertainty will continue to dog firms and households in the EU, if the Commission's attempts to lower energy costs for consumers at the expense of renewable-energy producers by extending “windfall profits taxes” and mandated lower costs succeed. Such measures will lower producers’ revenues, which will translate into lower renewables investment.

How to play China's reopening? What are the dichotomies in the performance of China's plays in financial markets? Why has the Chinese central bank tightened liquidity since October and what has been the impact on local rates and the RMB? Is global growth about to bottom? What is the outlook for EM stocks, currencies, credit markets as well as the broad-trade weighted US dollar?

China's economic recovery will be led by consumer spending on services rather than the industrial sector. The current equity market leadership – outperformance by tech stocks – is unsustainable. Persistent deflationary forces will compel policymakers to inject more liquidity and bring down interest rates to reflate the economy. Hence, the RMB will resume its decline against the USD soon.

Slowing growth would be bad for equities, but so would stronger growth since it would mean more rate hikes.

Bank Credit Analyst

Bank Credit Analyst

In Section I, we note that the global growth outlook has modestly deteriorated over the past month, despite an improving 12-month outlook for Chinese domestic demand in response to the imminent end of the nation’s “dynamic zero-COVID” policy. Investors should remain conservatively positioned over the coming year, as we recommended in our Annual Outlook report. In Section II, we examine whether the structural risks facing global stocks are higher or lower today than they were prior to the global financial crisis, and what that implies for stock and bond risk premia.

This week, we look at the latest data releases in the G10, along with implications for all the major currencies.