BCA Indicators/Model
To kick start our new research agenda at Equity Analyzer, we welcome you to our weekly screener report. Each week we will deliver three screeners highlighting stocks exposed to various macro and investment views and themes, that have either been suggested by various BCA strategies, such as the Global Investment Strategy, or are based on research by the Equity Analyzer team. In our first installment, we take a look at US Tech stocks, equity sentiment, and quality "bubble" stocks.
Trump's policies aim to support domestic producers and will be pro-growth and inflationary, at least initially. This environment is supportive of equities. Earnings will likely be strong, but elevated valuations make equities prone to a correction. Earnings growth broadening will translate into performance broadening – the S&P 493, Cyclicals, Value, Small and Mid are likely to outperform.
This week, we update our Central Bank Monitors (CBMs), that help us calibrate how monetary policy should be adjusted in developed-market economies. Our conclusion is that while overall, easier monetary settings are required, there a few trade ideas that arise from the divergences in signals amongst G10 countries.
Trump’s resounding victory brings a popular mandate that ensures deregulation and higher trade tariffs. Higher budget deficit and immigration reform are also in the cards as the Republicans look like they may squeak a thin margin in the House of Representatives. Foreign policy will become more unilateral, with US assets outperforming initially.
Trump’s resounding victory brings a popular mandate that ensures deregulation and higher trade tariffs. Higher budget deficit and immigration reform are also in the cards as the Republicans look like they may squeak a thin margin in the House of Representatives. Foreign policy will become more unilateral, with US assets outperforming initially.
Trump’s resounding victory brings a popular mandate that ensures deregulation and higher trade tariffs. Higher budget deficit and immigration reform are also in the cards as the Republicans look like they may squeak a thin margin in the House of Representatives. Foreign policy will become more unilateral, with US assets outperforming initially.
Trump may be favored, but Harris is now underrated. The Senate is highly likely to go Republican – Harris would be gridlocked if she pulled off a victory. If Trump wins it will be a full sweep. Expect volatility in the short term.
Trump may be slightly favored for the White House but the US election is still extremely close. Odds of a contested or contingent election are rising, which should cause stock market volatility. A Republican sweep should cause more volatility. Democratic gridlock is next most likely but benign for stocks in the short run.
Our Q3 portfolio was defensive, which we believe will be the appropriate stance in the next six-to-twelve months. Data coming out of the US has remained robust which could cause US bond yields to temporarily overshoot. An overshoot in US bond yields will be an opportunity to dial up the portfolio’s defensive tilt. The average decline in 10-year Treasury yields 12 months after the first Fed rate cut is 100 bps. This time should be no different. There are not many changes to this quarter’s portfolio allocation. We have upgraded UK gilts to overweight and downgraded European credit to underweight. Portfolio duration remains the same. In terms of future changes, we are generally watching the trend in inflation given many central banks are delivering jumbo rate cuts. Any pause in the disinflationary trend we have seen will send bond yields soaring. This is a risk to our view. Otherwise, a recession in the first half of 2025 will cement our long duration stance.
As we head into a more turbulent macroeconomic and geopolitical period, investors should favor countries with newly elected government, small government size, and ample room to cut policy rate. Ideally, they should also be in a stable region, and not so dependent on the US or China. Hence, we are introducing the Global Political Capital Index as a way to integrate these factors into a score that can help narrow down the countries with the best and worst abilities to deal with the incoming challenges.