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The ongoing profit contraction among Chinese industrial firms underscores that deflationary headwinds dominate the domestic economy. Although the annual pace of decline of industrial profits slowed from 8.3% y/y in June to 6.7% y/y in July (a 15.5% y/y drop…
With the US presidential election approaching, our US political strategists are warning investors that stock markets are not immune to politics and geopolitics. Our colleagues have shown that out of 28 bear markets since the Civil War, 17 of them have…
The Treasury market’s reaction to Fed Chair Jermone Powell’s Jackson Hole speech was relatively tame on Friday. Although there was some volatility during the speech, the 10-year yield ended the day broadly unchanged. Meanwhile, the 2-year yield rose by 5.5…
China removed checks and balances in its political system to deal with a very dangerous economic transition. The transition is going badly, yet investors cannot rely on checks and balances to correct or prevent policy mistakes. The Taiwanese election is a looming bellwether.
According to BCA Research’s Emerging Markets Strategy service, while it may be tempting to bottom fish, the team advises that investors maintain a cautious stance on Argentinian sovereign credit. Even though the election of a right-wing candidate in the…
Chinese authorities have recently ratcheted up support for the currency. The PBoC continues to set its daily yuan fixing at a stronger-than-expected rate, with the yuan midpoint (a reference for trading that caps the range between +/-2%) at 7.1992 per dollar…
According to BCA Research’s US Political Strategy service, the Democratic Party is favored to win the 2024 election as long as it is not discredited by a major shock. But recession odds are not low. The US economy has enjoyed a lot of positive surprises…
Chinese banks surprised markets with a more modest-than-anticipated rate cut on Monday. The one-year loan prime rate (LPR) was reduced by 10 basis points to 3.45% – slightly above expectations of a bigger cut to 3.40%. Moreover, the five-year LPR – which is…
The next six-to-nine months hold a crucial test of whether the equity market will ratify the soft landing and the Biden administration or not. If so, then markets will rally on policy continuity and likely gridlock. If not, then markets will struggle until the election is over and again in 2025-26.
Before doctors prescribe treatments to a patient, they first make a diagnosis. The success of the treatment is contingent upon the accuracy of the diagnosis. The same is true for a country’s economy. Many commentators use notions like debt deflation,…