美银：The Flow Show-20 for the ‘20s

Investment Rating - The report indicates a bullish sentiment towards long bonds and emerging markets, while expressing caution regarding US equities and the US dollar [1][2][72]. Core Insights - The report highlights a significant shift in investment flows, with $15.0 billion moving into bonds and $1.7 billion into gold, while US equities experienced a $10.0 billion outflow [8][11]. - Emerging markets are positioned favorably, with relative price performance at 50-year lows compared to US equities, suggesting an easy allocation decision towards EM [2][3]. - The BofA Bull & Bear Indicator rose to 5.2, indicating strong inflows into high-yield bonds and emerging market assets, reflecting robust credit market conditions [5][11]. Summary by Sections Market Performance - Year-to-date performance shows gold at 25.8%, stocks at 7.7%, and government bonds at 6.0%, while oil and crypto are down by 5.0% and 5.4% respectively [1]. - The report notes that international value stocks are outperforming growth stocks, particularly in the context of stalled European and Japanese banks [1][14]. Investment Flows - Weekly flows indicate a $15.0 billion inflow to bonds, with significant inflows into investment-grade and high-yield bonds, and emerging market debt seeing its fourth-largest inflow ever at $3.8 billion [13][76]. - Private clients are increasingly favoring high-yield bonds, TIPS, and utility stocks, while selling off Japan, dividend, and energy stocks [11][83]. Economic Outlook - The report discusses a potential shift in focus from global rate cuts to Fed cuts in the second half of the year, driven by a weakening US labor market and deflationary pressures from tariffs [1][32]. - It emphasizes that the US government budget deficit has averaged 9% of GDP over the past five years, driven by a significant increase in government spending [31][32]. Sector Analysis - Inflows were noted in materials, consumer sectors, and real estate, while financials, technology, and healthcare sectors experienced outflows [77]. - The report suggests that the current environment is conducive for a contrarian long bond strategy, despite the prevailing bearish sentiment towards US dollar assets [63][72].