Latest from BCA Research

Special Report

The odds of a “Minsky Moment” for the Chinese banking sector are low. They, however, will continue facing cyclical and structural headwinds, including a dismal asset quality and profit outlook. Bank stocks remain a value trap. Absolute-return investors should sell rebounds in Chinese bank stocks.

Though there are some positive signals recently for the Democrats, it is still hard for them to close the gap and turn things around. The Republicans are still favored to win the Senate as well as the House in the upcoming election.

The first in a series of Strategy Insights where we present a checklist for extending duration in each major government bond market. This first entry focuses on the US.

Outside of Germany, European growth fares better than many believe. Will this hidden resilience help the euro and push German yields higher?

Special Report

In this week’s report, we release an update to our long-term REER valuation model and expected future returns for major currencies.

Clients have been pushing back on our recession call on the grounds that it is incompatible with the economy’s second-half acceleration and the more recent easing in financial conditions. We examine both of those points in the course of doing some pushing back of our own.

Seasonal weather and price variability in the first quarter will dissipate, which will reduce the agita caused by the recent inflation scare. This will increase the Fed’s comfort level in initiating a rate-cutting cycle in June with a 25 bp cut. With inflation well-behaved, real interest rates will move lower and gold prices will move higher. The rate-cutting cycle also will allow the USD to weaken as assets ex-US become more attractive; this will be bullish for gold. Physical demand for gold is expected to remain robust, along with safe-haven and central-bank diversification demand, due to heightened geopolitical uncertainty. We continue to expect gold to trade above $2,200/oz this year.

We rank the US spread sectors in terms of risk versus reward.

While 2024 will see various election risks, global geopolitical uncertainty is driven by the US election and its struggle with Russia, China, and Iran. The stock market can manage local domestic political risk. But it will correct upon a major outbreak of geopolitical uncertainty.

Democrats remain favored for reelection in 2024, which implies gridlock and policy status quo in 2025. That is not negative for stocks in the near term. However, economic, political, and geopolitical risks will escalate from here, causing volatility.