V i e w p o i n t | 31 Oct 2024 01:08:09 ET │ 10 pages Japan FX USDJPY rise likely to be countered by further BoJ tightening CITI'S TAKE As had been broadly anticipated the BoJ left its policy rate unchanged at 0.25% at today's meeting. We had thought the USDJPY could return to around ¥152/$ in the present recovery, though there may be temporary further upside depending upon the result of the US election. However, with JPY weakness restarting of late we think the BoJ will hike its policy rate to 0.5% at eit ...

Investment Rating - The report indicates a neutral investment rating with the BofA Bull & Bear Indicator at 6.2, suggesting a balanced market sentiment [29]. Core Insights - The report highlights a structural shift back to a 5% inflation environment, driven by factors such as globalization reversal, low debt, and demographic changes, indicating the beginning of a commodity bull market [3][10]. - It notes that China is increasingly relying on exports as domestic consumption slows, with retail sales growing only 3% annually since 2020 compared to 13% in the previous decade [3][10]. - The report emphasizes the importance of monitoring US hiring trends, as historical data shows that a decline in private sector job share below 40% often precedes a recession [3][4]. Summary by Sections Market Performance - Year-to-date performance shows gold at 22.4%, stocks at 15.4%, and cryptocurrencies at 14.3%, with cash and government bonds yielding minimal returns [2]. - The report notes significant inflows into cash ($24.5 billion) and bonds ($20.7 billion), while equities saw inflows of $13.7 billion [6][18]. Economic Indicators - The report suggests that if the ISM manufacturing index exceeds 49, it could lead to a rise in long-term bond yields, indicating better opportunities in Q4 [2][8]. - The ratio of new orders to inventories is highlighted as a leading indicator for ISM manufacturing PMI, with expectations of an ISM reading of 52 by October 2024 [8][14]. Sector Analysis - The report indicates that the financial sector experienced the largest inflow in six weeks, while utilities faced the largest outflow in ten weeks [7][18]. - It also notes that BofA private clients are reallocating their investments, with significant purchases in REITs and financials while trimming positions in T-bills [7][22]. Global Trade Dynamics - China’s GDP growth is reported at 5%, but domestic growth is sluggish, with consumer confidence at all-time lows [10]. - The report discusses the impact of trade restrictions on global imports, particularly in key industries like electric vehicles and steel, which could limit deflationary pressures [3][10]. Commodity Outlook - The report asserts that commodities are expected to outperform bonds in the coming years, with total returns for commodities significantly higher than those for long-term U.S. Treasuries over the past four years [10][26]. - It emphasizes that the current commodity bull market is just beginning, with annualized returns projected between 10-14% [10].

Accessible version | --- | --- | --- | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|-------| | Global Rates Weekly Sahm-day maybe | | | | The View: Central banks out for summer | 02 August 2024 | | | We retain a bullish bias across m ...