BCA Weekly Commentary 5/01/24: Glass Half Full NOT Empty

ECONOMIC IMPACT. For well over a year we maintained the economy was at or near negative real growth taken into account inflation.  Our last note in 4/24 outlined just that and nothing has changed since then in fact the latest GDP report showed slight negative growth which SHOULD have been case all last year if not for underestimating inflation. Except valuations tied to the AI tech bubble were near record levels in part tied to electioneering ahead of elections last Fall.  Further recession fears tied to tariffs plus inflation fears reduced valuations further even with cheaper value stocks tied to the economy. In 2024 we maintained our conservatism despite  many indices returning 20% plus.  In 2025, post election we have witness valuations go from extreme euphoria to near panic with narratives running from rampant inflation to start year to now recession.  The assumption was tariffs would wreak havoc.  To us its an exaggeration because we believe tariffs wouldn't last & they are transitionary not permanent part of a negotiating tactic.  Well its looking more and more likely that economy will avoid a full blown recession and most of the ill effects of tariffs inflation wise would be offset and then some by lower commodity prices especially oil. 

 Furthermore with $8 Trillion or 40% of GDP in infrastructure spending to boost domestic manufacturing and lower taxes the next 3 to 5 years may experience an 1980s like growth boom the EXACT OPPOSITE of what so called experts thought.  We expect 3% plus GDP growth going into 2026 & beyond and most will feel like its a boom vs the exaggerated 2% plus growth last year.

INVESTMENT IMPACT. We remain fully invested in anticipation of accelerating growth into 2026 with the catalysts being the many trade deals yet to be announced and the start of infrastructure spending for onshoring manufacturing.  Further upon replacement of the Fed Chair in May 2026 may prompt more accelerated rate cuts.  The continued growth of AI and next year robotics will be growth themes.  The resolution of Ukraine war will also fuel global growth and recent minerals deal points to this. 

The wild cards going forward mainly the China tariffs and in 2027 Taiwan. China trade deal will be lengthy and likely act as a drag on US economy especially offsetting the effects of commodity deflation.

Lastly, we want to emphasize how politics, headlines ad media shape narratives that most of the time are not true. Maintaining a position counter to these false narratives isn't easy like you saw in 2024, but in the end fundamentals win longer term. We remind investors that the disclosure below has been at end of our blog posts for sometime and it turns out was dead right. Unsustainable gov't spending to boost economic growth never works and usually results in bubbles and inflation and it turns out that's exactly what occurred. However, redirecting govt spending to private sector via tax cuts while cutting regulation and on shoring manufacturing MAY result as we expect higher domestic growth. So the below disclosure may get revised sometime in 2025 since that's exactly what we expect.

We remind investors that going forward expectations for returns for the overall market over the next decade remain low as we expect well below returns vs history. Be that it may we are hopeful our models can improve on that going forward.

Our model portfolio performance has been updated as of the date of this newsletter as tracked by Sharesight.

For more insights see our website and disclosures found there at BCA. The thoughts contained in this newsletters are intended lend insights into BCAs current & future thinking on changes to BCA model portfolios. They are not intended to be recommendations and should not be taken as such. As always contact us for further explanation of how these events can affect your finances. To unsubscribe from our newsletters & website please email us with "unsubscribe" in the subject.