Latest from BCA Research
The outperformance of the S&P 500 relative to the S&P 500 EW index is likely to continue over the next year, supported by stronger earnings growth. However, extreme levels of market concentration will ultimately halt the outperformance of the mega-caps.
Mexican equity and fixed-income markets will continue outperforming their EM counterparts, regardless of whether global risk assets sell off or not. Also, we recommend a new trade: long Mexican stocks / short the S&P 500.
Europe is not left out of the AI race. Despite lagging US and China in LLMs and AI capex, Europe is quietly making progress where it matters, including industrial adoption. European capitals and the EU seem committed to not let that technology slip away, and are investing to support a “second-wave” role in AI. Scaling remains uneven, especially for SMEs, but will not prevent productivity gains in the region.
September job gains topped modest expectations, but year-over-year payrolls growth appears to have fallen below stall speed. We remain concerned about US activity.
The K-shaped economy will likely reverse in 2026, with the cyclical parts of the economy doing better. Upgrade Financials and Materials from neutral to overweight. Downgrade Communication Services and Utilities from overweight to neutral. Favor value stocks. Upgrade Bitcoin from neutral to overweight.
Our conclusions from 2019 were on point. We correctly predicted the fiscal and monetary deluge in 2020 and the subsequent rise in fiscal deficits. Now that we are where we are, someone is going to have to pay for it all. Especially as America's income inequality outcomes are just as bad as ever.
MacroQuant remains tactically overweight equities, favors an above-benchmark duration stance in fixed-income portfolios, remains bearish on the US dollar, and is bullish on gold.
Stock market valuations are moving as a near-perfect mirror image of the US real interest rate, meaning that the Fed is underpinning the stock market. But if the market stopped believing in AI-driven profits growth, valuations would collapse, irrespective of the Fed’s efforts to underpin them. When might this happen? Plus, two new tactical trades are: long BTC versus gold; and overweight industrials.
What should investors take from this flurry of diplomatic activity ahead of the US Thanksgiving holiday?