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Investing.com -- BCA Research’s MacroQuant model is signaling rising risks for equity investors, though the firm stopped short of calling for an imminent bear market.
“MacroQuant is recommending that equity investors keep their finger near the eject button but avoid pressing it for now,” the firm wrote in a note.
While the model sees “downside risks for stocks,” BCA advises only a “modest underweight in equities,” balanced by an overweight in cash.
It recommends a selective approach within U.S. sectors, favouring “energy, utilities, industrials, materials, consumer staples, and financials,” while maintaining a neutral stance on health care and communication services.
The model has a “negative bias towards IT, real estate, and consumer discretionary.”
Regionally, BCA’s model is overweight Canada, Australia, and the United States. It is neutral on Japan and underweight the U.K., emerging markets, and the euro area.
On the fixed income front, the model remains bearish on U.S. Treasury duration in the short term but is “more constructive longer term.”
In currencies, the MacroQuant model upgraded its view on the U.S. dollar “from extreme underweight to neutral,” suggesting a shift in sentiment amid global uncertainty.
Commodity preferences also shifted. “The model remains bullish on copper and oil,” BCA said, but “downgraded gold to neutral.”
Overall, while risk signals are building, BCA concludes the model is not yet flashing red.
Investors are urged to remain cautious and nimble, with an emphasis on cash and selectivity across regions and sectors.