Latest from BCA Research

This week, we present five of the more interesting yield curve trades in the Developed Markets for the latter half of 2016.

Tougher Fed talk warns that the Goldilocks combination of higher stock and bond prices in place since February is not sustainable.

As the sole shock absorber left in the global economy, FX markets will grow more volatile. The currency market's reaction to the recent Fed minutes exemplifies this phenomenon. Despite its sores and blisters, the U.S. economy wins the global beauty contest. Caught between those forces, the USD will continue to weaken over the next quarter or two before resuming its broader bull market.

Special Report

Australia's equities and currency are driven largely by industrial commodities prices, Canada's by the oil price. Given our more positive view on oil, we prefer Canadian assets, though both markets face risk from stretched property prices and household debt.

China has fallen into the same "fiscal trap" that ensnarled Japan in the 1990s. Unprofitable investment projects undertaken by SOEs are a necessary evil. The underlying problem is not overinvestment, but an economy that is demand-deprived. Meanwhile, structural factors will ensure that savings remain high. Any efforts by the authorities to curb credit growth will result in a sharp economic downturn. China will continue to generate excess capacity and export deflation to the rest of the world, which is good for bonds. We recommend going long Chinese banks, the most hated equity sector.

Gold will remain well bid over the short term. The surge in demand that pushed prices up by 20% ytd (Chart of the Week) will continue to dominate supply growth.

We focus on 3 stress-points in the economy and markets which segue to several high conviction investment recommendations.