Valuations
The yen’s discount, surplus, and rising real rates line up for a multi-quarter surge. Find out why EUR/JPY is the first short and when USD/JPY follows.
EUR/JPY has reached stretched levels, prompting new short trade recommendations across BCA Strategies. The calls are underpinned by compelling valuation, macro, and technical signals.
Despite macro headwinds, the OBBBA clearly favors Industrials, Financials, and Consumer Discretionary equity sectors. A carefully constructed, factor-aware basket in these sectors is well positioned to outperform in a fiscal-driven, uncertain environment.
MacroQuant’s US equity z-score is dangerously close to the -1 threshold. Moves below that threshold have reliably coincided with equity bear markets in the past. As such, MacroQuant recommends an underweight on stocks, offset by an overweight on bonds and cash.
The Life and Health Insurance industry offers downside protection and portfolio diversification in the event of a market correction, surging inflation, or stubbornly high interest rates.
Investors should modestly underweight equities in their portfolios and look to turn more aggressively defensive once the whites of the recession’s eyes are visible. We think that will happen within the next few months.
Imminent monetary and fiscal easing, along with resilient earnings growth, support a constructive outlook for equities. However, in the near term, significant tail risks persist. We recommend strengthening downside protection by lowering portfolio beta.
The US economy has held up better so far this year than we had expected. For the time being, investors should remain modestly underweight equities. A more aggressive underweight would be justified only once the “whites of the recession’s eyes” are visible.
