BCA Indicators/Model

Are bond yields overextended? We introduce a new global technical indicator that helps spot mean-reversion opportunities and shows which markets are nearing exhaustion.

We perform a decomposition of yields moves across six major developed government bond markets to get to the bottom of what’s been driving the global bond selloff of the past eight months.

Right now, the major stock and bond markets are more ‘anti-fragile’ than fragile, and the Joshi rule recession indicators signal that a US recession is not imminent. This justifies a neutral, or default, tactical weighting to both stocks and bonds until a major market does become fragile, or until recession risk elevates. The one major price trend that is fragile is the 65-day selloff in the US dollar, which justifies a tactical overweighting to the dollar.

The easing bias remains, but not all central banks are equal. This Central Bank Monitor update reveals who is ready to cut more and who is still pretending not to.

Our Portfolio Allocation Summary for May 2025.

The US High Quality (USHQ) portfolio outperformed on the margin through April, returning -0.6%, whilst its SPY benchmark returned -1.2%. On a trailing three-month basis, performance remains robust vs. benchmark, with USHQ generating +230bps of excess return. Volatility and drawdown are lower too.

MacroQuant sees the risks to US growth as being to the downside and the risks to inflation as being to the upside. Such a stagflationary brew justifies an underweight on stocks.