Latest from BCA Research
US Treasury yields have fallen below our fair value estimate as investors rotated out of AI equities and into fixed income. We lay out why near-term inflation risks argue for a rebound, and the tactical trades we initiate to position for it.
October saw a 0.9% decline in the S&P 500, dragged lower by Communication Services (-15.1%) and Information Technology (-6.8%). All other sectors delivered positive returns, led by traditional defensives – Health Care (+9.9%), Utilities (+10.2%), Consumer Staples (+11.6%) – and Energy (+14.0%). Although our overweight Tech call surrendered some performance during the month, IT has still gained 37% since the view was initiated on March 30, outpacing the S&P 500’s 20% advance.
Another Netanyahu-led government would raise the risk of Israeli escalation and a major oil supply shock, while an opposition victory would reduce, but not eliminate, this risk due to its greater coordination with and deference to the US.
Today's report examines several of the most interesting ideas we've heard over two weeks of meetings and calls with investors.
Despite October’s AI selloff, indices remain resilient thanks to historically high dispersion. We remain bullish, but with barbells across the portfolio. Hedge equity with equity: Overweight Technology and Healthcare. Remain overweight high yield. Downgrade linkers and upgrade nominal bonds. Upgrade tail risk protection to overweight as a hedge against a resumption of the war.
MacroQuant recommends a slight underweight to equities and an overweight to bonds and cash. The model is bullish on the US dollar, negative on gold, very negative on copper, and neutral on oil.
France’s fiscal mess is far from over, but the bond vigilantes may have gotten ahead of themselves. We book profits on short OATs, eyeing another opportunity in early 2027 as election risks resurface. Meanwhile, French equities are too cheap to ignore. We tactically buy on depressed valuations.
GBP offers attractive carry today, but the market’s aggressive rate hike pricing is likely to turn into a headwind within 12 months. Our latest Currency Chartpack examines the valuation, growth, rate, and policy drivers of the pound, showing why the long-term outlook is less rosy than near-term data implies.
