Sectors
In this report we scrutinize the state of US consumer finances, which are a key driver of the Payment Processing Industry. We expect demand for services to pull back in the early 2023 on the back of still high inflation and tighter monetary policy. The payment processing companies thrive but live on borrowed time. We are overweight for now but monitor this position closely.
Stocks will only get temporary relief from gridlock. Inflation will abate but then remain sticky. US and global policy uncertainty and geopolitical risk will remain historically high.
A client concerned about the slump in asset prices, the stubbornness of inflation, and rising bond yields asks what went wrong, and what happens next? This report is the full transcript of our conversation.
This week we present our Portfolio Allocation Summary for November 2022.
On their third quarter earnings calls, the largest banks indicated that their household and business customers remain in surprisingly robust shape. We interpret their observations as supporting our constructive near-term take on the economy and financial markets.
Banks face many challenges from a slower economy and tighter financial conditions, which offset benefits from rising rates and higher net interest income. It is likely that things will get worse, a sentiment supported by many banking executives. However, negative expectations have already been priced in. We will maintain our overweight for now but will fade this position after a bounce in the next bear market rally. The long-term outlook is negative. We prefer Regional Banks to Diversified Banks.
Is the BoE’s emergency intervention in its bond market a British idiosyncrasy that global investors can ignore? No, the UK’s near death experience sends three salutary warnings, with implications for all investors.
Stay defensive at least until the US midterm election is over. Gridlock is disinflationary in 2023 and hence marginally positive for US equities. But any relief rally will be short-lived as recession risks are very high.
The Fed says that to get back to 2 percent inflation, the US unemployment rate must increase by ‘just’ 0.6 percent through 2023-24. All well and good you might think, except that the Fed is forecasting something that has been unachievable for at least 75 years! Is the Fed gaslighting us? And what does it mean for investment strategy?
This week, we present our quarterly review of the BCA Research Global Fixed Income Strategy (GFIS) model bond portfolio for Q3/2022. We also discuss the model portfolio’s expected performance over next 3-6 months after our recent moves to reduce overall duration exposure and increase the underweight to US Treasuries.