Economy

September’s weak consumer spending data challenge the K-shaped recovery narrative and suggest that spending will slow to match already-weak employment growth.

Our Portfolio Allocation Summary for December 2025.

September job gains topped modest expectations, but year-over-year payrolls growth appears to have fallen below stall speed. We remain concerned about US activity.

The K-shaped economy will likely reverse in 2026, with the cyclical parts of the economy doing better. Upgrade Financials and Materials from neutral to overweight. Downgrade Communication Services and Utilities from overweight to neutral. Favor value stocks. Upgrade Bitcoin from neutral to overweight.

MacroQuant remains tactically overweight equities, favors an above-benchmark duration stance in fixed-income portfolios, remains bearish on the US dollar, and is bullish on gold.

Our key US fixed income views for 2026.

The odds have risen that we have reached a “Metaverse Moment” – a situation where investors punish AI companies for increasing capex. This warrants greater caution towards AI stocks specifically, and the broader S&P 500 more generally.

China’s economy is weakening across the board as global risk-off hits equities. With housing conditions worsening and exports contracting—a perfect storm—Beijing faces mounting pressure to deliver stronger, housing-focused stimulus.

Today, we are sending you the BCA annual outlook for 2026. The report is an edited transcript of our recent conversation with Mr. X and his daughter Ms. X, who are long-time BCA clients. Our discussion featured BCA’s economic and financial market outlook for the year ahead.

The September employment report probably won’t convince enough hawks to vote for a rate cut in December.