CoreMacro

Although we think the economy is weaker than investors realize, it has remained resilient and we will not fight the tape forever. If clear signs of a recession do not emerge over the next six weeks, we will drop our defensive recommendations.

Consensus sees one final ECB cut; we argue two are coming as deflationary forces are building in Europe. Dive in for the trade map: falling Bund yields, tighter peripheral spreads, and a euro primed for a 2026 rebound.

Special Report

Artificial intelligence will destabilize domestic politics and international security. States will try to adopt more creative fiscal policy, including by raising taxes on Big Tech.

Thanks to the tight monetary and fiscal policies so far, inflation and growth are heading lower in Turkey. Buy 2-year local currency bonds, currency unhedged. Also, upgrade Turkey's domestic bonds from neutral to overweight and stocks from underweight to neutral within their respective EM portfolios.

This insight gives life to four high-conviction views on European small caps, aero¬space & defense, banks, and telecoms by harnessing the power of BCA’s Equity Analyzer (EA).

The fact that the US economy has been slower to deteriorate than in past cycles is entirely consistent with our kinked Phillips curve framework. We will be looking to our MacroQuant model for guidance on when to turn fully defensive.

US equity investors should heed warning signals from US corporate bond yields. There are early red flags for EM share prices. Global trade will shrink in H2 2025. China’s economic tailwinds from H1 2025 – fiscal and export frontloading – are coming to an end.

Euro area and Chinese interest rates must fall much further to prevent monetary policy from becoming ultra-restrictive. But Trump’s attempts to force unwarranted rate cuts from the Fed risks a vicious backlash from the bond vigilantes.

Beijing’s supply-side push faces steeper hurdles than in 2016. With limited demand support and tighter constraints on cutting capacity, today’s reforms are unlikely to pack the same punch.

A potential right-wing government in 2027 will not stabilize the trajectory of the public debt-to-GDP ratio. Unsustainable public debt, a large current account deficit, and a sharp growth slowdown will lead Brazilian markets to underperform EM. Yet, to benefit from a quickly decelerating economy, we recommend receiving 2-year swap rates.