Latest from BCA Research

There are many different paths to macro investing. In our Volume II – The Beta Report – we present our own, which we have dubbed GeoMacro. We are very confident that we are “on to something,” but are humbled constantly by the markets, brilliant applications of different frameworks, and the confidence that, at BCA Research specifically, GeoMacro Strategy is housed in a collective of other approaches and methodologies that will greatly enhance our own capabilities. Our conclusion is simple: When it comes to searching for beta, nothing but geopolitics and politics matters. When it comes to searching for alpha, the macro fundamentals far outweigh geopolitics and politics.

Our Portfolio Allocation Summary for July 2024.

Concerns about the global economy have shifted from sticky inflation to faltering growth. Tight monetary policy is finally starting to bite. We suggest increasing portfolio defensiveness.

The Global Investment Strategy team downgraded global equities to underweight earlier this week. The latest reading from our MacroQuant model is consistent with this decision.

Special Report

In this report, we try to gauge how long the exceptional performance of the US can last, but from a more nuanced angle – inflows into US assets and the impact on the dollar and bond yields. Our work suggests that investors should not make any huge bets on the dollar today, but should be short over the longer term (3-5 years). Empirical evidence also suggests you want to be long US bonds into any downturn, relative to global-ex-US duration-matched government securities, but that view becomes less certain if the global economy avoids a downturn in the next few months. What is interesting in this report are high some conviction views across currencies, bonds and precious metals.

Special Report

The Labour Party’s comeback in the UK is widely expected and will lead to fiscal stimulus consisting of increased public spending with minimal tax hikes. But a sweeping single-party majority will reduce social unrest only at the cost of higher taxes over the medium term. The paradigm has shifted away from the Thatcherite low-tax regime of the now-discredited Tories. v

The bond market should sell off and drag stocks down on higher odds of a single-party sweep, policy uncertainty, unorthodox Trump presidency, aggressive tariffs, large tax cuts, large budget deficits, labor shortages, a fired Fed chair, and higher inflation.

Bank Credit Analyst

The uranium bull market is climbing a wall of doubt. Read more about the underlying supply-demand fundamentals supporting the current bull market.

Bank Credit Analyst

Bank Credit Analyst

In Section I, we examine some concerning signs of US economic weakness that emerged in June. We also discuss portfolio positioning in the face of falling interest rates and cross-check our recommended US equity overweight in the face of extremely optimistic expectations about AI’s impact on growth. We conclude that defensive positioning continues to be warranted. In Section II, we dig into those optimistic expectations for AI. We find that the US equity market is significantly overvalued unless the deployment of AI technology causes a 10-to-20 year productivity surge in line with what occurred during the IT revolution of the 1990s, with persistently high margins on the revenue generated from the improvement in growth. We doubt that AI will end up truly boosting economic activity by this magnitude.