Latest from BCA Research
Europe did not witness a major policy reversal. Inflationary pressures are coming down, enabling the ECB to cut rates and European states to maintain soft budgets. Geopolitical challenges ensure that European parties continue to cooperate on national defense, economic security, and energy security.
Non-trivial macro divergences have emerged between mainstream LATAM economies. This report compares and ranks Brazil, Mexico, Colombia, Chile, and Peru based on their business cycle outlook, macro policy stance, external accounts, and structural fundamentals. All in all, LATAM risk assets will fall in absolute terms given a strengthening US dollar and a global risk-off move in the coming months. Within LATAM, we favor Mexico, Chile and Peru, are neutral on Brazil, and bearish on Colombia.
We close our overweights to Energy and Aerospace & Defense. The macroeconomic backdrop is deteriorating for Energy. As for A&D, the good news is already priced in.
Although the comprehensive economic surprise indexes continued weakening in May, the metrics in our equity downgrade checklist haven’t softened enough to check more boxes now. While we continue to expect the US economy will enter a recession before year end, it is not yet certain and we remain tactically neutral.
The ECB is now firmly in easing mode, even if it refuses to pre-commit to a specific rate path. What does this data dependency mean for the euro and European yields?
US Treasury yields bounced after this morning’s employment report. We offer our updated views about how long the recent trading range will hold.
According to OPEC+’s revised production path, the group will begin unwinding some of its production curbs in Q4. This announcement suggests that the coalition might be shifting its strategy towards defending a price floor. Such a shift in OPEC+ strategy does not imply that the ‘OPEC put’ is completely dead. Rather, its strike price has been lowered.
Prime Minister Narendra Modi won a third term and will become the third longest-serving prime minister of India. While investors responded negatively to the BJP’s loss of an outright majority, Modi and the NDA will continue to perpetuate the reforms they have already put into motion. The result also affirms that Indian democracy continues to thrive, contrary to the narrative that Modi had formed an authoritarian grip on the country, a view we always rejected.
The USHQ portfolios kept pace with their benchmarks, as the Value factor led the factor landscape.