6 reasons why U.S. economy may not achieve soft landing: BCA
BCA Research identified six key reasons why the U.S. economy may struggle to achieve a soft landing, as outlined in their latest note"Cold Hard Facts: Positioning For An Economic Slowdown."1. Consumers Are Tapped Out: The firm notes that consumer spending is weakening, which is why BCA recommends underweighting sectors like Consumer Services and Consumer Staples. This indicates that consumers' financial resources are depleting, reducing their ability to drive economic growth.
3. Disinflationary Trends Return: With disinflationary trends becoming more apparent, BCA suggests underweighting inflation-sensitive sectors such as Energy and Materials. This shift indicates that the inflationary pressures are easing, reducing the need for sectors that benefit from rising prices. 5. Downside Protection: BCA observes that the recent market rally has been narrow and multiple technical indicators suggest a potential correction. To safeguard against downside risks, they recommend adding defensive sectors such as Utilities and Pharma to portfolios.
BCA concludes that despite better-behaved inflation prints, the broad-based deterioration in economic data and slowdown in consumer spending signal tough times ahead. They suggest taking profits from GAI-related industries and preparing portfolios for defensive positioning ahead of expected rate cuts.
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