Latest from BCA Research
Small-cap outperformance has been driven mostly by within-sector stock selection, not differences in sector weighting. With the small-cap earnings catch-up reversing and leverage rising, we would fade the low-quality small-cap rally. We still want cyclical and AI exposure, but through higher-quality large caps rather than highly levered small-cap Tech. We are also opening a small-cap Health Care trade as an idiosyncratic way to gain exposure to the M&A cycle.
Europe faces a difficult macro backdrop, but whether it slips into recession remains finely balanced. We present two perspectives before translating them into investment implications.
Global equities have reached extremes on multiple measures, none of which are reliable timing tools. But imbalances in economics and investing can build for far longer than rational analysis would predict - and usually unravel much faster than investors expect.
The Strait of Hormuz is a unique geographical feature. Other than the Bosporus and Dardanelles Straits that allow passage between the Mediterranean and the Black Sea (via the Sea of Marmara), there are very few other such, economically valuable, choke points. What many armchair geopolitical strategists consider “critical” naval routes – Strait of Malacca, Panama Canal, Suez – are really just pathways of convenience. “Nice to haves” – in that they significantly reduce sailing times – as opposed to the “must have” that is Hormuz.
As long as the AI boom keeps booming, all other investment considerations will remain on the back burner. However, if the AI trade fizzles, this would expose deep-seated problems within the global economy, which could very well lead to an economic downturn as early as next year.
China's economy is slowing, but policymakers are unlikely to launch broad-based stimulus in H2. Meanwhile, the emergence of China's "Kimi moment" underscores Beijing's commitment to technological upgrading and the country's rapidly advancing AI capabilities.
The Supreme Court, Senate, Fed, and other institutions have proved resilient so far under the Trump administration. US institutional erosion is overstated.
In this Strategy Insight, we assess how Middle East-related energy and shipping disruptions are shaping the global inflation outlook and review the implications for inflation-linked bond markets. We also examine the outlook for core inflation and the resulting implications for central bank policy and duration positioning.
