CoreMacro

EM local bonds face near-term turbulence from rising inflation, global risk aversion, and currency weakness. Use the sell-off to build exposure: medium- and longer-term fundamentals remain favorable.

Special Report

Not all chokepoints are equally dangerous. How we adapt to a shock is often underappreciated. Besides the ongoing Hormuz shock, investors should pay attention to Taiwanese chip production and Chinese rare earth minerals.

AI capex is supporting the global economy but also generating collateral damage for rate-sensitive sectors such as housing, as well as highly indebted governments. Maintain a benchmark allocation to equities for now and look to get more defensive next year.

The global bond selloff is not over, but opportunities are emerging. US Treasuries and French OATs remain vulnerable to further selling, while other European government bonds look increasingly attractive. Investors should favor German Bunds and peripheral bonds, particularly on a currency-hedged basis.

Special Report

In 2026, against the backdrop of plunging birth rates around the world, investors were focused on AI bottlenecks. Little did they know that the biggest bottleneck to artificial intelligence was, ironically, human intelligence. Progress in overcoming this bottleneck set geopolitics ablaze and ushered in an economic boom that dwarfed anything that came before it. It also paved the way for speciation, unprecedented social strife, and ultimately, the demise of the human race. This is the story of World War E.

US bonds will likely continue selling off until tighter financial conditions – most plausibly a double-digit decline in the S&P 500 – cool nominal growth. Higher discount rates will threaten US equity valuations before earnings weaken. AI stocks will peak well ahead of AI capex. Remain downbeat on EM stocks.

Central banks have begun a mild tightening cycle as elevated energy prices raise concerns about second-round inflation effects. We use BCA’s Central Bank Monitors to test whether hawkish market pricing is justified and identify tactical opportunities across global bond and currency markets.

Concerns by the major AI companies that they are locked into a financially unsustainable arms race for AI dominance are likely playing as much a role in their newfound “go slow” approach as concerns over AI doom.

Scott Bessent’s attempts to suppress yields while financing large twin deficits risk crashing foreign inflows, the dollar, US bonds, and equities. Without a major equity selloff or large-scale commercial bank purchases of Treasurys, the bond selloff will persist – producing a major equity drawdown and a lower dollar.

Special Report

We propose a unified framework for predicting the direction of short-term interest rates and long-term bond yields that brings together three approaches: 1) the saving-investment approach; 2) the Taylor rule approach; and 3) the portfolio balance approach. Our analysis suggests that bond yields in the US and many other countries have increased mainly because of a higher neutral interest rate and a larger term premium. Given the risk of a further rise in inflation expectations, investors should overweight inflation-linked bonds.