BCA Research is out with its third quarter strategy outlook.
Chief Global Strategist Peter Berezin and his team have delivered yet another high-quality report with an expansive look at the macroeconomic picture, asset allocation recommendations, equities, fixed income, currencies and commodities.
Here are the hi-lights and one key chart.
- Macroeconomic Outlook: Global growth is peaking but will remain solidly above trend.
While the proliferation of the Delta strain is likely to trigger another wave of Covid cases this summer, the economic impact will be far smaller than during past waves.
- Global Asset Allocation: The risk-reward profile for stocks has deteriorated since the start of the year.
Nevertheless, with few signs that the global economy is heading towards another major downturn, investors should maintain a modest equity overweight on a 12-month horizon.
- Equities: Favor cyclicals, value-oriented, and non-US equities.
Emerging markets should spring back to life in the autumn once vaccine supplies increase and Chinese fiscal policy turns more stimulative.
- Fixed Income: Maintain below average interest-rate duration exposure. The 10-year US Treasury yield will finish the year at 1.9%.
Spread product will continue to outperform high quality government bonds.
- Currencies: The US dollar will resume its weakening trend as growth momentum rotates from the US to the rest of the world. EUR/USD will finish the year at 1.25.
- Commodities: Brent will rise to $79 per barrel by end-2021, 9% above current market expectations.
While the lagged effects from the slowdown in Chinese credit growth earlier this year will weigh on base metals during the summer months, the long-term outlook for metals is positive.
Favour gold over cryptos as an inflation hedge.
V-Shaped Recoveries Are Generally Followed By Strong Labor Market Recoveries