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Investors Are Using The Wrong Framework For Thinking About Inflation

The kinked Phillips curve not only explains why inflation surged last year but makes a number of surprising predictions, chief of which is that inflation could fall significantly over the coming months without a major increase in the unemployment rate. In the near term, that is bullish for stocks.

Global Investment Strategy by Peter Berezin
Another Hotter-Than-Expected US CPI Report In September
US headline CPI growth accelerated to 0.4% m/m in September from 0.1% m/m, surpassing expectations of a milder 0.2% m/m increase. The core measure excluding food and energy grew at the same rate as August (0.6% m/m) but still exceeded the 0.4% m/m…
Daily Insights
Good News Is Bad News?
The US economic surprise index – which measures the extent to which the economic data is either beating or missing economists’ forecasts – has recently moved back into positive territory. A move above zero indicates that economists have been overly…
Daily Insights
A Clash Between Chinese Deflation And US Inflation

BCA’s Emerging Markets Strategy team’s view remains that US inflation will prove to be sticky. That said, in this report, we examine under what conditions a considerable drop in US core inflation, whenever it transpires, would be bullish for stocks. Potentially significant US disinflation would be bullish for stocks if it is due to an improvement in supply-side dynamics, but bearish if it is demand driven.

Emerging Markets Strategy by Arthur Budaghyan
The UK’s ‘Near Death Experience’ Sends These 3 Warnings

Is the BoE’s emergency intervention in its bond market a British idiosyncrasy that global investors can ignore? No, the UK’s near death experience sends three salutary warnings, with implications for all investors.

Counterpoint by Dhaval Joshi
On The US Labor Supply-Demand Gap
Extremely tight US labor market conditions – illustrated by the extremely narrow gap between labor supply and demand – have been putting upward pressure on wage growth. As such, this gap needs to widen in order for overall price pressures to ease. How…
Daily Insights
Will Moderating Goods Inflation Be Enough To Prompt A Fed Pivot?
Extremely accommodative policy settings globally during the pandemic – including injections by central banks – caused a surge in excess liquidity, leading to “too much money chasing too few goods.” Prices of commodities rose and led to higher global export…
Daily Insights
Fed Signals Intention To Maintain Hawkish Stance
Minutes from the Fed’s September 20-21 meeting underscore that FOMC members continue to believe that inflation risks outweigh overtightening risks. Specifically, “many participants emphasized that the cost of taking too little action to bring down inflation…
Daily Insights
Tactical Bond Trade: Position For A Flatter UK Gilt Curve
BCA Research’s Global Fixed Income Strategy service recommends investors go long a 3-month/30-year Gilt barbell versus selling a 5-year Gilt bullet, on a duration-matched basis. The UK gilt market has become a volatile focal point for global investors. An…
Daily Insights
Biden Cracks Down On Chips (Plus: Election Model Updates)

Stay defensive at least until the US midterm election is over. Gridlock is disinflationary in 2023 and hence marginally positive for US equities. But any relief rally will be short-lived as recession risks are very high.

US Political Strategy

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