Latest from BCA Research

Energy markets are balanced in the short run, which keeps our Brent price forecasts at $95/bbl and $105/bbl in 2024 and 2025. Structurally, we see an upward bias to inflation, as geoeconomic fragmentation fundamentally alters supply chains; higher costs follow. Military access to oil will be prioritized. Renewables are the future, but war will be fought with hydrocarbons. We remain long the COMT, XOP and PPA ETFs.

Comments on yesterday’s CPI report and yield moves.

Our Valentine’s Day report is about two love stories: the infatuation with US tech and China’s infatuation with housing. We describe how these love stories will end, and why Europe could be the winner.

Special Report

Looking at small caps at the global aggregate level can be misleading. Small caps are cheap and oversold in the DM universe, but expensive and overbought in EM. Watch closely for clarity on the coming recession to upgrade DM small caps to overweight relative to DM large caps. Lighten up small cap exposure in the EM universe. For investors in the US small caps, the S&P 600 is a more beneficial benchmark for asset owners, while the FTSE Russell 2000 is an easier-to-beat benchmark for asset managers.

We created a sector selection scorecard based on performance of sectors under various macroeconomic regimes while taking into consideration revisions to expected earnings growth and valuations in a historical context. Our total sector selection scorecard suggests overweighting defensives such as Utilities, and Consumer Staples, and underweighting cyclicals such as Consumer Discretionary, Industrials, and Financials. Considering this analysis, we have adjusted our sector positioning accordingly.

Special Report

The global memory chip market will improve in 2024, characterized by a further rebound in memory chip prices and decent demand growth. Artificial intelligence (AI) memory and a replacement cycle of servers, smartphones, and PCs will propel memory chip shipment. We remain overweight South Korean equities within the EM equity benchmark. we also recommend a new relative trade of long Korean tech stocks and short the EM equity benchmark.

Special Report

The German economy has lagged that of Europe. This trend will continue, but does it mean German equities will underperform further?

Special Report

China will continue to suffer from a “triple crisis”. Though there could be a tactical bounce, cyclically we still recommend underweighting Chinese equities.

Chinese A-shares will probably begin forming a volatile bottom. The basis is that authorities will likely throw the kitchen sink at the onshore market in an attempt to stabilize share prices. The same is not true for offshore listed stocks. Hong Kong-traded Chinese share prices will likely continue to fall. Beijing is less concerned with offshore stocks as their holders are primarily foreign investors.

This week’s report explores factors behind the recent rise in the dollar, and whether this could continue in the next month.