Latest from BCA Research

The large buildup in Chinese households’ savings deposits is unlikely to fuel consumption. Poor outlooks on labor market conditions, income, and households’ unwillingness to borrow will hinder consumption through the rest of 2024.

Special Report

Historically, the biggest driver of the small cap premium was “migration” i.e., a subset of small stocks earning extreme positive returns as they become large stocks. However, migration rates between small and large stocks have declined in the US. Small companies that would have grown to become successful large caps are either staying private, getting acquired by larger companies, or are entering public markets when they are already large caps. As a result, only the very worst companies are left in the small cap space. Investors should avoid a structural passive allocation to US small cap indices.

Special Report

In this Special Report we assess the absolute and relative attractiveness of developed market government bonds using several fair value models. Longer-term investors who are focused on value should overweight US long-maturity bonds, and favor Spanish, Australian, and potentially UK government bonds within a DM ex-US allocation.

Special Report

We recommend overweight in Pharma over a tactical and strategic investment horizon, as challenges, that have recently hampered the industry group’s performance, are dissipating. Likely election outcomes are positive for the industry, while major trends like generative AI applied to drug development and an aging population are long-term tailwinds.

The signs of an approaching recession are starting to emerge. We will turn tactically defensive once they all fall into place.

Looking at economic activity, global monetary policy seems restrictive, however, the behavior of financial markets tells a different story. What gives?

Special Report

Nonfinancial corporate balance sheets are generally in good shape, but there are signs of deterioration at the bottom-end of the credit spectrum. We present evidence showing that credit deterioration at the bottom-end of the credit spectrum has a habit of migrating upwards.

There is a path to a soft landing, but it is a narrow one. We estimate that there is only a 20% chance that the US will avoid a recession before the end of 2025. We are currently neutral on global equities, but expect to downgrade stocks to underweight during the summer.

Special Report

China is trying to export its way out of its economic slowdown while the US has already formed a hawkish consensus on foreign policy and trade. Investors should take cover as global financial markets are underrating the new phase of the trade war, which will escalate from here.

The sharp move higher in copper prices is missing a clear fundamental catalyst. Meanwhile, the cyclical outlook for the global economy in general, and manufacturing activity in particular, is unlikely to provide a tailwind. Given that aggregate copper inventories on global exchanges have been rising briskly, there are high odds that the copper price surge will soon reverse.