BCA Indicators/Model
We review our Model Bond Portfolio performance for Q3 and look ahead as energy prices continue to drive fixed income markets. Balanced labor markets point to a mild tightening cycle, creating opportunities in government bonds and credit, while inflation-linked bonds continue offering protection against persistent energy risks.
Our G10 FX cyclical scorecard still favors high-carry currencies over low yielders, suggesting patience should continue to pay. We break down the factors driving each currency and highlight the most appealing relative-value opportunities.
MacroQuant recommends an underweight to equities and bonds, counterbalanced by a significant overweight to cash. The model is very bullish on the US dollar, slightly negative on gold and copper, and positive on oil.
Global capex is driving the strongest industrial cycle since 2021. The US is best positioned to capture the gains and to weather near-term risks, supporting widening real-rate differentials and favoring continued upside in the dollar in the coming months.
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.
Foreign exchange markets are shaped by a wide range of macro influences. The sheer breadth of relevant information makes systematically assessing where a currency stands at any point in time a challenging analytical task. We introduce an FX scorecard that condenses the full range of data into nine thematic scores, providing a clear visual snapshot of a currency's position and how it's evolving.
MacroQuant recommends a slight underweight position in equities, counterbalanced by a slight overweight to bonds, and a significant overweight to cash. The model is positive on the US dollar, modestly negative on gold, and bullish on copper and oil.
The PCE/CPI gap is an increasingly important factor driving the near-term outlook for Fed policy. We discuss the drivers of that gap and conclude that it’s likely to narrow in the coming months.
Despite recent increases, long-maturity Treasury yields are roughly consistent with fundamental fair value. We see limited value in long duration plays.