Latest from BCA Research
The president did not announce significant new tax cuts or economic stimulus.
This report examines the implications for Chinese exports and global trade in light of the US Supreme Court’s ruling on tariffs.
The US economy is in the Slowdown phase of the business cycle, according to our measure of aggregate US economic activity; growth remains positive but acceleration is negative. Historically, this phase more often resolves in reacceleration than recession. Recent market price action, from the index, to sectors, to relative industry performance, broadly reflects typical Slowdown phase dynamics.
Fourth quarter US GDP growth clocked in at 1.4%, well below consensus expectations of 2.8%. We are not too troubled by the miss. The government shutdown weighed on the economy, with government spending subtracting 0.9 percentage points from growth. Real private final domestic demand – a clean measure of GDP growth that excludes government expenditure, net exports, and inventories – rose by a respectable 2.4%.
Trump is saving face with new tariffs but will avoid any major new tariff shock until 2027. For now, Iran risk will overshadow tariff volatility.
The “Chuck Norris Premium” is now fully in the market. Since the miraculously successful nabbing of President Nicolas Maduro on January 3, the odds of subsequent use of military against Iran increased.
The neutral rate in the US is being propped up by a variety of forces that are at risk of reversing. These include the AI capex boom, large budget deficits, and the extraordinarily high level of household wealth. As such, interest rates are likely to surprise to the downside over the next few years.
Oil price risks remain skewed to the upside over the near term as geopolitical risks continue to dominate. Nevertheless, we ultimately expect bearish fundamentals to reassert themselves over a six-to-12-month timeframe and drive oil prices lower.
Tech has starkly underperformed other equity sectors and the tech-heavy US market has underperformed non-US markets, but global stocks are up and have comfortably outperformed bonds. This pattern of performances is likely to continue through the rest of 2026. Plus, two new tactical trades are: long coffee; and long ETH.