BCA Research Predicts Long-Term Deflation Driven by Capex Surge

Chief investment strategist at BCA Research Marko Papic predicts that the United States and global economies could face disinflation or deflation by 2030. He argues that repeated supply shocks, such as the Russia-Ukraine war and the crisis in the Strait of Hormuz, are forcing governments and businesses to surge capital expenditure to build energy infrastructure and supply chain redundancy.

This trend includes significant investments in alternative energy, semiconductor fabs, and new transportation corridors. Papic suggests this over-investment may create excess capacity that puts downward pressure on prices in the long run. This shift is further compounded by massive AI-related spending from Meta, Microsoft, Amazon, and Alphabet, which Goldman Sachs estimates could exceed $5 trillion by the end of the decade.

While current indicators show immediate inflation concerns, including a July PCE inflation rate of 3.7% and rising 30-year government bond yields, Papic maintains that the long-term result of these investments will be a deflationary environment. Recent government actions, such as the United States Department of Energy issuing $17.5 billion in loans for the nuclear supply chain, align with the capex surge Papic describes.