BCA: US Stocks "Will Peak Soon, Bear Market Will Begin", Global Investors Should Increase Allocation to Government Bonds
BCA analysts stated that the US stock market is likely to peak soon, and a bear market will begin. Global asset allocators should increase their allocation to government bonds instead of stocks. It is also reasonable to allocate a significant amount to US dollar cash
The U.S. stock market is in a bear market, are government bonds the safest option?
Recently, the U.S. technology stocks have been "bleeding", with the market value of giant companies evaporating significantly. The S&P Nasdaq has fallen for three consecutive days, shaking market confidence.
Renowned investment research institution BCA Research warned investors in its latest report: the U.S. stock market may be approaching its peak, and a bear market is imminent.
Warning of a Bear Market: "Cash on the Sidelines" Ratio Hits Historic Low
Analyst Arthur Budaghya believes that the main reason for the U.S. stock market peaking is that the ratio of "cash on the sidelines" held by retail and institutional investors has hit a historic low, indicating insufficient market "firepower".
"Cash on the sidelines" refers to the proportion of cash held by investors. A decrease in this ratio indicates that investors are more inclined to invest their funds in the market, but currently, this ratio has dropped to a historic low, suggesting that there is not much cash available for investment in the market.
Budaghya stated that while the total amount of investable funds is still substantial in absolute terms, this number has stagnated as the Federal Reserve has reduced its asset holdings.
Furthermore, the Fed's quantitative tightening policy has reduced the money supply, decreasing market liquidity and exacerbating funding tensions in the market.
Based on this, BCA Research recommends that investors increase their holdings of government bonds and U.S. dollars in order to reduce investment risks. Government bonds are considered a safer investment choice, while holding U.S. dollars can help investors mitigate losses during market fluctuations.
The U.S. stock market is likely to peak soon, and a bear market will begin. Global asset allocators should increase their allocation to government bonds rather than stocks. A significant allocation to U.S. dollars is also reasonable.
Budaghya specifically pointed out that the low proportion of investable funds and the overvaluation of the U.S. stock market could be a turning point for the AI-driven stock market rebound. Currently, large tech companies such as Apple and Microsoft have conducted significant stock buybacks, but this may not fully offset the downside risks in the market