Global stocks face pressure amid rising yields and stretched valuations – BCA Research By Investing.com

Investing.com – Rising bond yields and stretched equity prices are creating headwinds for global equities, according to BCA Research’s latest macro quant report.

As economic growth indicators improve, persistent inflation and monetary conditions will weigh on market sentiment, BCA analysts said.

The MacroQuant model has moved to a neutral stance on U.S. stocks, predicting below-average returns for the S&P 500 over the next one to three months, analysts said. Among sectors, the model picks defensive options such as healthcare and utilities, citing stable revenue prospects and the potential for profit improvement.

It also found moderate support, but deeply cyclical sectors and technologies are recommended for hold or exit, BCA Research said.

Regionally, the United States remains the standout performer, aided by strong corporate earnings and share buybacks. However, analysts caution against lofty estimates, trading 60% above fair value estimates — levels not seen since the dotcom era.

In fixed income, the BCA model remains neutral on bond duration in the short term, but suggests that investors may benefit from an increase in duration in 2025 as long-term Treasury yields are viewed as attractive. The model selects government bonds from the United Kingdom, the Eurozone and New Zealand in trading portfolios.

The U.S. dollar is expected to continue strengthening in the near term, driven by economic resilience and an accelerating currency, although analysts note that valuation metrics point to overextension.

In commodities, BCA favors oil more, reflecting demand for base metals in China. Analysts say gold is down to neutral as dollar strength offsets central bank buying.

BCA’s overall outlook is conservatively weighted toward stocks, emphasizes selectivity among sectors and regions, and shows relative opportunities in bonds and commodities.