Equities

Symptoms of a liquidity trap for Chinese households are appearing. Our proprietary indicators for the marginal propensity to spend among households and enterprises continue falling. There has been a paradigm shift in Beijing’s approach to policy stimulus. Authorities will be slow to introduce large stimulus. Hence, China-related financial markets are set to fall further.

3 years ago

Emerging Markets China

Portfolio

Monthly Portfolio Update: Where Could We Be Wrong?

Risk assets would perform well over 12 months only if inflation falls to 2% without triggering a recession. That would be unprecedented. We recommend investors stay defensive.

3 years ago

Essentials

Chinese PMIs Signal Softening Economic Momentum

Chinese economic data releases continue to disappoint. Wednesday’s NBS PMI release showed the composite PMI dropped from 54.4 to 52.9 in May – the lowest since January. Importantly, the Manufacturing PMI unexpectedly fell deeper in contraction territory from…

3 years ago

Essentials

Does Labor Market Resilience Necessitate Fed Hawkishness?

The JOLTS survey for April shows job openings unexpectedly rising from an upwardly revised 9.7 million to 10.1 million – above expectations of a decline to 9.4 million. The job openings rate inched up to 6.1% from 5.9% while the ratio of job openings to…

3 years ago

Essentials

A Word On French Banks

According to BCA Research’s European Investment Strategy service French banks are better positioned to weather current headwinds than their European peers. The team sees limited risks to the French banking sector from the recent banking turmoil. French…

3 years ago

CoreMacro

Why Oil Is Headed To $55 (The Reprise)

Expectations for oil demand growth through 2023-24 are way too optimistic. Until these expectations fall to -0.5-1 percent, the oil price has further downside. Plus: collapsed complexity confirms that AI is in a mania, while basic materials stocks and ZAR/EUR are rebound candidates.

3 years ago

Essentials

What Can Save Margins?

One of the most noteworthy developments of the Q1-2023 earnings season was that the net profit margin widened from 10.7% in Q4-2023 to 11.1%. This marked the first margin expansion since the 12.9% peak in Q2-2021. The year-end target for net profit margin is…

3 years ago

Essentials

Favor Aerospace & Defense On A Strategic Basis

According to BCA Research’s US Equity Strategy service, despite temporary hurdles, the longer-term trends support an overweight in Defense. Global military spending is poised for significant increases as the world system destabilizes due to great power…

3 years ago

Essentials

A US Earnings Recovery Amid An Economic Recession?

Market pricing of Fed rate expectations has moved closer in line with our US bond strategists’ expectations. According to the CME FedWatch tool, Fed funds futures are pricing in a 40% chance that the fed funds rate will be lower than current levels following…

3 years ago

Essentials

A US Equity Market Divergence: How Sustainable?

A major divergence has emerged between the performance of the S&P500 and the US equal-weighted stock index. Even though the S&P500 index has been grinding higher, the US equal-weighted index has failed to rally. Such a pronounced decoupling…

3 years ago

Equities

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