Dhaval Joshi, chief strategist at BCA, said in the broker's latest strategy report that recent US trade policies are creating stagflation in the country but deflation abroad.
"Trump's tariffs are inflationary for the US, but deflationary for the rest of the world," Joshi wrote in a note.
The report recommends overweighting UK government bonds compared to US Treasuries, arguing that rising inflation in the US will weaken demand for traditional safe-haven assets.
Joshi compared the current trajectory of US policy to the moment of Brexit in the UK in 2016, when gilts lost ground.
"If Trump's tariffs are 'America's Brexit', then UK gilts will recover ten years of low performance against US Treasuries," he said.
As for stocks, BCA argues that US markets remain inflated by enthusiasm about artificial intelligence.
The broker sees this as a declining trend, with valuations built on fragile assumptions that dominant tech companies will maintain leadership in the next tech wave.
"Companies that are the big winners of one technology are rarely the big winners of the next," Joshi wrote.
European stocks, on the other hand, trade at a strong discount. BCA says that gap, currently around 35 percent, could narrow significantly.
As the AI bubble fully deflates, the valuation of Europe relative to the US will be revalued by about 25 percent," Joshi said.
Within Europe, the broker points to the healthcare sector as particularly undervalued. Despite showing post-pandemic earnings growth identical to that of its US counterparts, European healthcare stocks trade at a record discount. BCA recommends overweighting German healthcare stocks compared to the US healthcare sector.
Bitcoin, meanwhile, is emerging as an unexpected winner of the global capital shift.
With investors losing confidence in the US dollar, BCA says they are turning to Bitcoin as a hedge.
"For the first time in history, the biggest beneficiary of the dollar exodus was Bitcoin," Joshi wrote.
He argues that Bitcoin, like gold, benefits from a growing perception that it is a non-confiscable asset in a fragile fiat system.
"If that is the case, then the three components of Bitcoin's value are going to trend much higher in the coming months and years," Joshi said, suggesting that his previous price target of $200,000 could be too low.
A key recommendation in the report is to structurally shift from US stocks and bonds to Europe and Bitcoin.
