Latest from BCA Research

The turmoil in US regional banks will weigh on economic growth. Arguably, it would be better for the broader stock market if growth slowed because banks became more conservative in their lending than if it slowed because the Fed had to raise rates to over 6%. In both cases, economic growth would decelerate but at least in the former scenario, the discount rate applied to earnings would not be as high.

Depending on market volatility during the next few trading days, the Fed will either lift rates by 25 bps next week or pause its tightening cycle. Either way, the Fed’s hiking cycle is close to its peak but rate cuts won’t be coming anytime soon.

Bank Credit Analyst

The Fed’s Volckeresque rate-hiking campaign has challenged all banks, but Silicon Valley Bank and Signature Bank were anomalously vulnerable and the Fed’s new lending facility will ease the liquidity pressures on other banks. The current turmoil is not a replay of 2008.

Bank Credit Analyst

Welcome to BCA Crypto - a research series on cryptocurrencies. Over the next few months, we will release a series of reports analyzing this polarizing asset class. In this introductory report we distinguish between fact and fiction, clearing some of the misconceptions that investors often have about the cryptocurrency market, cryptocurrency custody, market participants, risk, return and correlation. We conclude that while the correlation between equities and cryptocurrencies will stay relatively high until the end of the cycle, at least for Bitcoin, this correlation probably peaked last year.

Bank Credit Analyst

A cryptocurrency is a digital representation of value native to a blockchain and secured by cryptography. But what exactly does this mean? In this report we go over a step-by-step guide on how a group of friends might go about creating a crypto¬currency from scratch. In the process we cover some important concepts related to cryptocurrencies such as private keys, nodes, networks, blockchains, and consensus mechanisms

China’s victory in getting KSA and Iran to restore diplomatic relations is of far greater consequence to commodity markets than the past weeks’ bank failures in the US. For China, further success in sorting long-standing security issues in the Middle East could incentivize oil and gas capex and affect oil flows. With short- to medium-term fundamentals largely unchanged, we are keeping our 2023 and 2024 Brent forecasts similar to last month, at $95/bbl and $110/bbl, respectively.

We recommend reducing allocation to Banks to underweight, selling into potential bounces. To do so, we put banks onto downgrade watch.

The odds of achieving a goldilocks scenario in the US where inflation drops amidst robust growth are low. If US bank woes do not escalate, the Fed will continue hiking amid a contraction in US corporate profits and global trade. The recovery in China’s industrial economy will disappoint. Commodity prices are breaking down.

Bank failures are another ‘canary in the coal mine’ warning that a US recession is imminent, yet stocks, bonds, and the oil price are still a long way from fully pricing it.

The growth and inflation profiles of the three central European countries are set to diverge. The outlook for Polish and Hungarian Bonds are not attractive anymore. Book profits on them. Instead, initiate a new trade: pay Polish / receive Czech 10-year swap rates.