Global Equities Are Hanging By A Thread

The unintended consequences from the continued altering of the capital structure of firms, by issuing debt and retiring equity at a time when operating cash flow growth is showing signs of fatigue is disconcerting. This artificial massaging of EPS is not sustainable and if non-financial corporate credit quality has peaked for the cycle as seems likely, the equity risk/reward tradeoff remains skewed to the downside.

Bottom Line: A capital preservation mindset is still warranted. Continue to prefer global defensive over cyclical sectors.

For additional information, please visit our Global Alpha Sector Strategy website at gss.bcaresearch.com.

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Helicopter Money: A Semi-Hostile Q&A

The latest Global Investment Strategy Weekly Report entitled “Helicopter Money: A Semi-Hostile Q&A” examines this very topical issue and concludes the following points:

  • Helicopter money is coming, and once deployed, will prove to be much more successful than most people imagine.
  • Investors should stay long Japanese and German inflation swaps.
  • USD/JPY and EUR/USD are ultimately likely to reach 140 and 0.9, respectively, over the next two years.
  • The U.S. economy will remain resilient enough to make helicopter money unnecessary but a strengthening dollar will greatly curtail the ability of the Fed to raise rates.
  • Investors should overweight Treasurys relative to bunds and JGBs.
  • Helicopter money will benefit gold as well as the beleaguered European and Japanese stock markets.

To access the report entitled Helicopter Money: A Semi-Hostile Q&A, please click here.

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