Latest from BCA Research
MacroQuant is overweight bonds, underweight equities, and neutral on cash. Within the equity universe, the model is overweight Japan, the US, and the UK, underweight the Euro Area countries and China, and neutral the remaining countries. The sector model favors defensives and Energy over cyclical sectors.
This week we present our Portfolio Allocation Summary for October 2022.
We remain bearish on equities. Inflation is a monetary phenomenon that is embedded and perpetuated by a wage-price spiral. The Fed will “keep at it until the job is done.” Economic growth is slowing, and an earnings recession as soon as the end of this year is highly likely. US equities are not cheap and rising rates and slowing earnings growth will take their toll on performance. Don’t fight the Fed!
We share our thoughts about some of the less-discussed topics that came up across three weeks of face-to-face discussions with investors. We retain our conviction that the American consumer’s demise has been greatly exaggerated, and it continues to underpin our constructive near-term view on the US economy.
Inflation is sticky, growth slowing, and central banks will stay hawkish. Not all the bad news is priced in. Stay cautious: Underweight equities, overweight government bonds.
Investors should go long US treasuries and stay overweight defensive versus cyclical sectors, large caps versus small caps, and aerospace/defense stocks. Regionally we favor the US, India, Southeast Asia, and Latin America, while disfavoring China, Taiwan, Hong Kong, eastern Europe, and the Middle East.
This week’s Global Investment Strategy report titled Fourth Quarter 2022 Strategy Outlook: A Three-Act Play discusses the outlook for the global economy and financial markets for the rest of 2022 and beyond.
