BCA Research: Stocks will rally in the first half, ASX could outperform again

Thu 12 Jan 23, 10:53am (AEST)
Graphic render of a bull in the foreground of an upward stock chart
Source: iStock

Key Points

  • US-led recession is unlikely this year, mild if it occurs
  • Equities to do most of its rallying in the first half of 2023
  • ASX could be a stand out performer, especially against the US and emerging markets

Montreal-based investment consulting house BCA Research is going against the consensus grain, arguing the global equity market’s gains will be made in the first six months of 2023 rather than the last six. 

The current consensus among investors as well as some of Wall Street’s biggest firms is for either an equity market rally in the second half of 2023 or another year of underperformance in risk assets.

For example, CFRA Chief Investment Strategist Sam Stovall sees a year-end target for the S&P 500 of 4,575. But he also says the bulk of this outperformance will come only in the second half.

"We see the market recovering in the second half as we project the Fed to finish raising rates by late Q1 / early Q2, and pausing through Q3 2023," Stovall wrote in a recent note.

But BCA Chief Global Strategist Peter Berezin sees things differently, as he wrote in a separate, overnight note for clients.

We think the opposite is more likely: Stocks will rally in the first half as recession fears abate but then level off or decline in the second half as it becomes clear that a tight labour market will limit the Federal Reserve’s ability to cut rates.


Berezin also adds he is expecting an upside surprise to global economic growth in the coming year, arguing that the most forecasted recession in living memory may never come.

Relative to beaten-down expectations, global growth will surprise on the upside in 2023.


The view is informed by some increased optimism in data from China and Europe. The reopening of the world’s second-largest economy has already boosted risk sentiment for its equities and currency. Any announcement of increased stimulus from Beijing will likely fuel the rally even higher. The research house also has a rosy view of the US economy, arguing there will either be no US-led recession or a very mild one. 

The only caveat to all this is that a global economic downturn cannot be ruled out. That is, there may be no global recession but it does not mean the sought-after soft landing is a guarantee either.

The call for an overweight equities position is in line with a lot of its work from last year, in which it argued the traditional 60/40 portfolio should probably be readjusted to a 50/30/20 split of equities, bonds, and alternatives respectively.

In June last year, BCA forecast this version of a model portfolio could return five percent a year on nominal terms. Better than that, the research house believes an Australian-domiciled “50/30/20” portfolio could outperform its US counterpart by more than two percent over the next decade. Its predictions also suggest gains from Australian shares are expected to even outstrip expected gains in emerging markets.


The Starting Base

DM vs EM vs US: Top Down Charts
Source: Callum Thomas, Top Down Charts


Written By

Hans Lee

Senior Editor

Hans is one of the Senior Editors at Livewire Markets and Market Index. He created Signal or Noise and leads the team's coverage of the global economy and fixed income markets.

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