Rate cuts “probably too little, too late”: BCA From Investing.com

Investing.com – BCA Research warns that upcoming interest rate cuts may come too late to counter a looming recession.

In a recent note, BCA pointed out that the effects of monetary policy are lagged and current economic conditions reflect the impact of the previous tightening cycle. As a result, the expected rate cuts, while imminent, are “likely too little, too late.”

The research firm stresses that while markets have recently turned to a more risk-on and softer landing, this optimism may be premature.

BCA believes that “the probability of the US economy entering a recession in the next 6 to 12 months is high,” even if rate cuts are in the offing. In the past, easing cycles have not been enough to prevent recessions.

The market values ​​of major technology companies fell in August amid growing concerns about rising AI infrastructure costs and growing recession risks, which could make these stocks particularly vulnerable in the event of a market downturn.

In addition, the BCA report points out that global growth dynamics remain uneven.

It argues that China is unlikely to be able to offset the potential decline in US demand due to its “timid and inadequate economic stimulus.” As a result, the global economy could face significant headwinds, resulting in a limited outlook for Asian currencies and other procyclical assets.

BCA says the outlook for China’s economy remains uninspiring, but the firm believes current valuations offer some downside protection, so strategists maintain an overweight position in domestic equities and a neutral stance on offshore equities relative to other markets.

BCA also expects oil prices to remain range-bound in the short term due to various market forces. However, the company believes that weakening global demand will take precedence over the longer term, likely leading to a downward trend in oil prices.