(BofA-ML) The Flow Show

BofA “Flow Show” – Key Points (Aug 15, 2025)
  • Macro & Policy Backdrop
    • 88 global central bank rate cuts YTD – fastest easing cycle since 2020.
    • Market expects Fed to join, potentially pushing DXY <90 → USD secular bear theme into 2026.
    • Fed policy debate: higher inflation target, yield curve control, gold revaluation – policy disruption = debasement.
  • Asset Allocation Trends
    • YTD leaders: Bitcoin +27.5%, Gold +27.2%, Europe equities +25.7%, IG bonds +8.6%, HY bonds +8.2%, USD -9.8%, Oil -12.6%.
    • Flows: $33bn to cash, $26.4bn to stocks, $25.9bn to bonds, $4.5bn to crypto, $2.6bn to gold.
    • Massive inflows into IG bonds ($349bn YTD, 2nd biggest year ever) and equities ($576bn YTD).
  • Positioning & Sentiment
    • BofA Bull & Bear Indicator at 6.1 (Neutral): strong equity breadth & inflows offset by bearish HF positioning (long 2y USTs).
    • Private clients: 64% in equities, 18% bonds, 11% cash; overweight Magnificent 7; recent buys in MLPs, bank loans, HY bonds; selling staples, REITs, energy ETFs.
  • Trade Themes
    • Sell USD: weak dollar supports gold, crypto, EM.
    • Energy Bearish medium-term: oil/gas -41% since March; Trump-Russia Arctic cooperation could push prices lower into 2026.
    • Equities: S&P 500 P/B at record 5.3x; P/E 95–98th percentile → “It better be different this time” risk.
    • Gold & Crypto: still under-owned (gold avg 2.2% AUM, crypto 0.3%) – potential upside as debasement hedges.
  • Overbought Signals
    • EM & Japan equities, gold, silver, platinum significantly above 200DMA.
    • Oil & natural gas oversold.

Trading Takeaway:
BofA is leaning into USD weakness, gold/crypto/EM longs, selective equity upside (but stretched valuations), and short/underweight energy in medium term. Strong inflow momentum in credit and equities, but high sentiment readings suggest risk of “buy rumor, sell fact” post-Jackson Hole.