Highlights So What? Markets remain complacent about U.S.-China trade. Why? The U.S. has escalated the trade war by threatening sanctions on key Chinese tech firms. Chinese President Xi Jinping is preparing his domestic audience for…
Highlights The risk premium in crude oil prices is rising again, as policy risk – and the potential for large policy-driven errors – increases (Chart of the Week).1 This is not being fully reflected in options markets, where…
With all U.S. imports from China affected, price rises will percolate upward through all tradable industries and consumer goods. Two points are worth noting: The domestic value-add of Chinese exports to the U.S. is not as…
There are at least five reasons for the true cost of a trade war being higher than expected. A trade war would degrade the value of the existing stock of human and physical capital. This would result in lower potential GDP. It…
Highlights Duration: We see current bond market behavior as very similar to mid-2016, when heightened political uncertainty obscured the economy’s true strength and kept bond yields lower for longer than was justified by the…
Highlights We’ve searched in vain for imminent domestic weakness in the U.S. economy, … : Much of our work this spring has focused on trying to poke holes in our view that the equilibrium fed funds rate remains above the…
Highlights So What? Odds of a total breakdown in U.S.-China relations are highly underrated. Why? The key market-relevant geopolitical event is Trump’s large risk appetite. Inflationary pressures resulting from the trade…
President Trump’s announcement this week of a new deployment of aid to U.S. farmers, to offset China’s retaliation to steeper tariffs, highlights that agriculture has been the sacrificial lamb in the U.S.’s hawkish trade…
While we remain bullish on global equities and other risk assets over 12 months, we went tactically short the S&P 500 last Friday following the market’s complacent reaction to the Trump Administration’s further tariffs increases…
BCA's Global Investment Strategy has recommended a tactical hedge to the overall overweight allocation to global equities in our House View matrix by shorting the S&P 500 index. However, we do not see the need to…