Latest from BCA Research

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

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

Special Report

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

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.

Easier financial conditions, rising home prices, rebounding consumer sentiment, and a stabilization in manufacturing activity all augur well for near-term US growth prospects. An unsustainably low savings rate is a key risk to the US economic outlook. Our revised forecast is centered on a recession starting in late 2024 or early 2025.

We are upgrading Europe Private Equity, predominantly driven by Buyouts, from underweight to neutral. Our outlook towards Global Buyouts is improving, with Europe benefiting from enhanced credit availability and an earlier recession. Non-domestic investors may also be advantaged by an appreciation in the EUR and GBP over the next market cycle.

Supply and demand shocks in markets critical to the renewable-energy and defense industries will continue to play havoc with prices, which will negatively impact capex. In the short run, this benefits China given its already-dominant position in these markets. Longer term, investors already are providing capital for long-term projects needed for the energy transition. We remain long the XME ETF, given its low exposure to lithium and nickel holdings.