BofA-The Flow Show Anything But Bonds-240404

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Trading ideas and investment strategies discussed herein may give rise to significant

risk and are

not suitable for all investors. Investors should have experience in relevant markets and the financial

resources to absorb any losses arising from applying these ideas or strategies.

>> Employed by a non

-US affiliate of BofAS and is not registered/qualified as a research analyst

under the FINRA rules.

Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take

responsibility for the information herein in particular jurisdictions.

BofA Securities does and

seeks to do business with issuers covered in its research

reports. As a result, investors should be aware that the firm may have a conflict of

interest that could affect the objectivity of this report. Investors should consider this

report as only a singl

e factor in making their investment decision.

Refer to important disclosures on page

11 to 13.

The Flow Show

Anything But Bonds

Scores on the Doors

: crypto 50.4%, oil 20.9%, commodities 11.8%, gold 10.5

%, stocks

6.9

%, US dollar 2.8%, cash 1.4%, HY bonds 1.4%, IG bonds -0.8%, govt bonds -3.3%.

Zeitgeist

: “This is the moment in rally when bears start to talk about their longs.”

A bull.

Zeitgeist

: “It’s different this time…it always is at new highs.” A bear.

Zeitgeist

: “They just jacked up my rent 20%...I’ll have to move again.” NYC colleague.

The Biggest Picture

: symbiotic link

between gold & real rates severed past 18 months;

gold

>$2200/oz = real rates of -2% not +2% (Chart 2); investors hedging risk Fed cuts

CPI

accelerates + endgame of Fed ICC/YCC/QE to backstop US government spending.

The Price is Right

: remains an “ABB” (Anything But Bonds) bull market…buyers’ strike

in government bonds

potent factor behind 40-year equity high in Japanese stocks, 20-

year high in Europe, new highs in US, outperforming commodities & crypto

; Wall St

(value of financial assets) back to 6x the si

ze of Main St (GDP – Chart 3).

Tale of the Tape

: 2020s era of higher inflation driven by fiscal excess, deglobalization,

war (

note Red Sea volumes still 60% below Nov'23 levels - Chart 8); that said, biggest

Q2 tactical

risk to consensus “ABB” bull = decline in US payrolls (when cost of living

high)

signalling Fed needs (not just wants) to cut rates.

Chart 2: Gold discounting a collapse in real rates

US 10-year real rate % (inverted) vs gold price (RHS)

Source:

BofA Global Investment Strategy, Bloomberg

BofA GLOBAL RESEARCH

on page 2…

500

1000

1500

2000

2500-3%

-2%

-1%

'06 '08 '10 '12 '14 '16 '18 '20 '22 '24

US 10Y real rate % (inverted) Gold (RHS)

04 April 2024

Investment Strategy

Global

Michael Hartnett

Investment Strategist

BofAS

+1 646 855 1508

michael.hartnett@bofa.com

Elyas Galou

Investment Strategist

BofASE (France)

+33 1 8770 0087

elyas.galou@bofa.com

Anya Shelekhin

Investment Strategist

BofA

+1 646 855 3753

anya.shelekhin@bofa.com

Myung

-Jee Jung

Investment Strategist

BofAS

+1 646 855 0389

myung

-jee.jung@bofa.com

Chart 1: BofA Bull & Bear Indicator

Falls to 5.3 from 5.8

Source:

BofA Global Investment Strategy The indicator

identified above as the BofA Bull & Bear Indicator is

intended to be an indicative metric only and may not be

used for reference purposes or as a measure of

performance for any financial instrument or contract

, or

otherwise relied upon by third parties for any other

purpose, without the prior written consent of BofA

Global Research. This indicator was not created to act as

a benchmark.

BofA GLOBAL RESEARCH

Extreme

Bullish

Extreme

Bearish

Sell

Buy

5.3

Accessible version

The Flow Show

| 04 April 2024

Weekly Flows: $81.8bn to cash, $14.2bn to stocks, $13.4bn to bonds, $0.9bn to gold,

$0.2bn to crypto.

Flows to Know:

• MMFs: $81.8bn inflow…largest in 13 weeks…quarter-end effect;

• Gold: $0.9bn inflow, $1.0bn past 4 weeks…not huge given all-time highs;

• IG bonds: $9.7bn inflow, inflows past 23 weeks;

• EM debt: 1st inflow past 8 weeks ($0.3bn);

• Bank loans: largest inflow since Apr’22 ($1.3bn);

• EM: largest inflow past 2 months ($3.8bn);

• Tech: $1.1bn inflow; note Q1’24 was 3rd largest quarterly inflow on record ($18.6bn);

• Materials: $0.7bn inflow, inflows past 8 weeks longest streak since May'22.

Big Flows to Know:

• MMFs: annualizing $1.2tn inflow (2nd highest ever – Chart 11);

• IG bonds: annualizing $500bn inflow (all-time high – Chart 13);

• US stocks: annualizing $310bn (2nd highest ever – Chart 12);

• EM stocks: annualizing $210bn inflow (all-time high – Chart 15 shows India inflows);

• Tech…annualizing $73bn inflow (all-time high – Chart 14).

On Cash: past 5 Fed rate cutting cycles inflows to MMFs rose in anticipation of the 1st

cut, MMF inflows then slowed meaningfully once the Fed started cutting rates, but

outflows historically start 12 months into a rate cutting cycle (Table 2 & Chart 10); note

as now cash as % of AUM will fall into rate cuts as cash underperforms other assets.

BofA Private Clients: $3.6tn AUM…61.6% stocks, 20.1% bonds, 11.5% cash; GWIM

equity allocation highest since Nov’22 (Chart 18); Q1 sees 1st quarterly outflow from

bonds since Q4'20 driven by record outflows from T-bills (Chart 9); private clients buying

EM debt, Japan & muni ETFs, selling utilities, energy & gold ETFs past 4 weeks.

BofA Bull & Bear Indicator: drops to 5.3 from 5.8 on HY bonds & EM outflows.

Long global producer, short US consumer: buy PMI laggards including contrarian

China, sell leaders; China financial conditions super-easy (10-year bond yields @ all-time

lows, renminbi vs dollar close to all-time lows); China HY real estate (up 35% from

Nov'23 low – Chart 7) says debt implosion tail risk receding; China manufacturing PMI to

12-month high…icing-on-global PMI recovery-cake…supports…commodities (Chart 5),

industrial metals, real estate, materials, Korea, EM = best laggard Q2 winning trades if

global soft landing correct (Chart 6 & Table 1); in contrast cyclicals already discounting

ISM >60 (homebuilders, semis, Japan) or ISM 55-60 (industrials, financials, EU cyclicals)

much more vulnerable to any rise in “hard landing” probability (Chart 4).

The Flow Show |

04 April 2024

Chart 3: Big asset inflation past 6 months = Wall St > Main St in ‘24

US private sector financial assets as a % of GDP

Source:

BofA Global Investment Strategy, Haver, Bloomberg. Note Q1’24 based on BofA estimate

for GDP and NYA Index performance

BofA GLOBAL RESEARCH

Chart 4: FMS investors say roughly 65% ‘soft’, 25% ‘no’, 10% ‘hard’

BofA Global FMS expectations for global economy next 12 months

Source:

BofA Global Fund Manager Survey (March 2024 edition)

BofA GLOBAL RESEARCH

Chart 5: Tech vs Commodities

Nasdaq 100 vs Commodities

Source:

BofA Global Investment Strategy, Bloomberg

BofA GLOBAL RESEARCH

Table 1: Trading the ISM inflection

Assets and implied levels for ISM manufacturing PMI

Asset

Implied ISM

Homebuilders

Japan (Nikkei)

Semiconductors

Industrials

Sweden (OMX)

Financials

Germany (DAX)

EM ex-China

Materials

Real estate

Korea (KOSPI)

Commodities

ISM (Mar'24)

50.3

Industrial metals

Source:

BofA Global Investment Strategy, Bloomberg

BofA GLOBAL RESEARCH

Chart 6: Biggest upside potential is in laggards if ISM picks up

ISM manufacturing PMI vs industrial metals (YoY %)

Source: BofA Global Investment Strategy, Bloomberg

BofA GLOBAL RESEARCH

Chart 7: China HY real estate bonds say receding debt implosion risk

China HY real estate total return index

Source:

BofA Global Investment Strategy, Bloomberg

BofA GLOBAL RESEARCH

QE era

2.9x

Berlin

Wall

NAFTA

China/

WTO

TPP

6.3x

6.0x

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

1951 1959 1967 1975 1983 1991 1999 2007 2015 2023

US private sector financial assets as a % GDP

4% 3% 4% 9% 11% 5% 7% 6% 7%

19% 23%

63% 64% 68% 65% 64%

59%

67% 66% 71%

65% 62%

27% 26% 21% 20% 21% 30% 21% 23% 17% 11% 11%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

No landing Soft landing Hard landing

'85 '90 '95 '00 '05 '10 '15 '20 '25

Nasdaq vs Commodities

Mar'00 Feb'24

-80%

-60%

-40%

-20%

20%

40%

60%

80%

'91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23 '25

ISM manufacturing PMI Industrial metals (YoY %, RHS)

May'21

-83%

+35%

100

150

200

250

300

350

400

450

'06 '08 '10 '12 '14 '16 '18 '20 '22 '24

China HY real estate total return index

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Tradingideasandinvestmentstrategiesdiscussedhereinmaygiverisetosignificantriskandarenotsuitableforallinvestors.Investorsshouldhaveexperienceinrelevantmarketsandthefinancialresourcestoabsorbanylossesarisingfromapplyingtheseideasorstrategies.>>Employedbyanon-USaffiliateofBofASandisnotregistered/qualif...

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