Core Viewpoint - The U.S. economy showed slight deceleration in Q2, but remains resilient, with GDP growth at an annualized rate of 3.0%, exceeding expectations. The Federal Reserve maintained interest rates, but internal divisions are growing, with a less than 50% probability of a rate cut in September [1][2][25]. Economic Performance - The U.S. Q2 actual GDP grew at an annualized rate of 3.0%, surpassing the expected 2.4% and previous -0.5%. The year-on-year GDP growth was 2.0%, consistent with prior values. PCE inflation for Q2 was 2.1%, below the expected 2.9% and previous 3.7% [1][17]. - Private consumption contributed positively to GDP, increasing from 0.3% to 1.0%, while private investment saw a decline from 3.9% to -3.1%. Net exports shifted from a negative contribution of -4.6% to a positive 5.0% [7][17]. Federal Reserve Actions - The Federal Reserve decided to keep the federal funds rate unchanged at 4.25-4.5%, aligning with market expectations. Notably, two Fed governors voted against the decision, advocating for a 25 basis point cut, marking a rare occurrence of dissent [1][17]. - Fed Chair Powell indicated that current monetary policy is moderately restrictive, with inflation remaining a concern. He noted that tariffs are beginning to affect prices and that future inflation impacts are expected [17][19]. Market Reactions - Following the Fed's decision, U.S. Treasury yields and the dollar rose, while stock markets and gold prices fell. The S&P 500 and Dow Jones indices decreased by 0.1% and 0.4%, respectively, while the 10-year Treasury yield increased by 4.6 basis points to 4.37% [19][25]. - Market expectations for a rate cut in September dropped significantly, with implied probabilities falling from 70% to 44%, and the anticipated number of cuts for the year reduced from 1.8 to 1.4 [2][25]. Economic Outlook - The U.S. economy is expected to experience a soft landing, supported by factors such as balance sheet repair, loose monetary policy, and favorable fiscal conditions. However, inflation risks remain, and the Fed is likely to prioritize inflation control over rate cuts [2][27].

Economic Performance - The US Q2 GDP growth rate was 3.0%, exceeding expectations of 2.4% and rebounding from a previous value of -0.5%[1] - Year-on-year GDP growth remained stable at 2.0%, consistent with the previous value[1] - PCE inflation for Q2 was 2.1%, lower than the expected 2.9% and previous 3.7%[1] Consumption and Investment - Private consumption contributed a 1.0% increase to the GDP, up from 0.3%, with durable goods and services consumption rising, while non-durable goods saw a slight decline[2] - Private investment's contribution dropped from 3.9% to -3.1%, with inventory changes negatively impacting the GDP by -3.2%[2] - Government spending's contribution improved from -0.1% to 0.1%, while net exports shifted from -4.6% to 5.0%[2] Federal Reserve Actions - The Federal Reserve maintained the federal funds rate at 4.25-4.5%, aligning with market expectations, but two board members voted against this decision advocating for a 25 basis point cut[3] - This marked the first instance in over 30 years where two board members opposed a decision, indicating potential future leadership changes within the Fed[3] Market Reactions - Following the Fed's meeting, US Treasury yields and the dollar rose, while stock markets and gold prices fell[4] - The implied probability of a rate cut in September dropped from 70% to 44%, with expectations for only one rate cut remaining in 2025[4] Economic Outlook - The US economy is likely to experience a soft landing, with inflation risks still present, suggesting caution regarding expectations for rate cuts[5] - The current economic conditions, supported by various fiscal measures, indicate that the Fed will prioritize inflation control over aggressive rate cuts in the near term[5]

Core Viewpoint - The report from Bank of America indicates a cautious investment stance towards the historically high valuations of the "Magnificent Seven" tech giants, suggesting a structural opportunity in small-cap stocks, particularly micro-cap stocks, as the market anticipates a shift towards quality and low-risk factors to hedge against economic downturns [1][2][4]. Group 1: Market Dynamics - The "Magnificent Seven" tech giants, including Apple, Microsoft, Google, Tesla, Nvidia, Amazon, and Meta Platforms, have been the primary drivers of the S&P 500 index, but their high valuations are causing concern among investors [1][2]. - The S&P 500 index is currently near historical highs, with expectations that it may face a significant pullback, as indicated by analysts predicting a potential drop of about 15% by the end of the year [2][3]. - Small-cap stocks, particularly micro-cap stocks, have shown strong performance, with the Russell Microcap Index rising approximately 22% since the beginning of the second quarter, outperforming larger stock indices [3][4]. Group 2: Investment Strategy - Bank of America emphasizes the importance of focusing on high-quality small-cap stocks while avoiding high-leverage consumer stocks and unprofitable tech stocks [1][4]. - The report suggests that the recent rebound in riskier small-cap stocks is driven by a "low-quality stock rebound" and short-covering, but this trend may not be sustainable as the market shifts back to fundamentals [4][18]. - Analysts predict that the market will transition from a "low-quality leadership" phase to a "high-quality steady growth" phase, where financially healthy small-cap stocks will become the new momentum leaders [19][20]. Group 3: Economic Outlook - The anticipated easing of monetary policy by the Federal Reserve, with potential rate cuts starting in September, is expected to benefit small-cap stocks significantly, as they are more sensitive to interest rate changes [23]. - The current market environment, characterized by a "one versus many" dynamic, where a few tech giants dominate, is seen as unsustainable, leading to a potential breadth improvement as investors seek value in overlooked small-cap stocks [22][23]. - Bank of America forecasts that if the U.S. economy avoids recession and enters a rate-cutting cycle, small-cap stocks could experience a "Davis double play" scenario, leading to significant excess returns compared to large-cap stocks [5][20].

Group 1 - The core viewpoint of the articles highlights the recent recovery and growth of the US stock market, driven by improved corporate earnings and favorable trade agreements, particularly between the US and Japan [1][2][3] - The S&P 500 and Nasdaq indices reached new historical highs, with significant contributions from major tech companies, particularly in the AI sector [1][4] - The earnings season has shown optimistic results, with Alphabet's revenue and profit exceeding Wall Street expectations, indicating strong performance in the digital advertising market [1][5] Group 2 - The market's recent rise is attributed to multiple factors, including the belief in a "TACO trade" becoming the norm and expectations of a soft landing for the US economy, with potential interest rate cuts by the Federal Reserve [2][6] - The performance of the "seven giants" in the tech sector has shown significant divergence, with companies like Nvidia and Meta performing well, while Tesla and Apple have struggled [4][5] - The AI action plan released by the White House signals a shift in federal policy towards AI development, which may further boost the tech sector's growth [2][6] Group 3 - Analysts suggest that the ongoing earnings growth is crucial for sustaining the bullish trend in the stock market, with expectations that corporate profits will continue to exceed forecasts [6][7] - The potential for a market pullback exists, as some analysts warn of overly optimistic investor sentiment, but the overall outlook remains positive if earnings growth continues [7][9] - The impact of the "Big and Beautiful" act on corporate earnings may provide a temporary boost, but concerns about rising fiscal deficits and long-term inflation remain [8][9]

Group 1 - The core view is that the US economy remains the cornerstone of the global financial market, with a "soft landing" scenario being the most likely outcome at 65% probability, indicating a moderate slowdown without entering recession [1] - Economic growth in the US is expected to continue at a steady pace, supported by strong real income growth driven by government fiscal support, despite uncertainties from government policies [2] - The labor market will be a key factor in reassessing economic outlooks, particularly with the recent rise in initial jobless claims [2] Group 2 - The European Central Bank has acknowledged that the interest rate cut cycle is nearing its end, with limited rationale for further cuts due to improving economic growth and increasing fiscal stimulus [2] - The UK economy shows signs of a slowing labor market and cooling inflationary pressures, with market expectations for the final benchmark interest rate to remain relatively high, presenting investment opportunities [2] Group 3 - The company maintains a neutral stance on overall bond duration but favors a steepening yield curve strategy, expecting shorter-term bonds to outperform longer-term bonds [3] - A downgrade has been made on the US CDX high yield index due to diminished valuation advantages, while maintaining a negative outlook on overall investment-grade bonds due to high valuations [3] - US government agency mortgage-backed securities are viewed as a preferred choice in fixed income asset allocation due to higher yields and lower volatility compared to US investment-grade corporate bonds [3]

Core Insights - The U.S. inflation is showing signs of rising again after months of stagnation, driven by increasing import costs and the upcoming release of key economic data, including the June Consumer Price Index (CPI) and retail sales report [1][5] - Analysts expect the June core CPI to rise by 0.3% month-over-month, marking the largest increase in five months, with a year-over-year increase projected at 2.9%, the first rebound since January [3][4] - The impact of tariffs on domestic prices is a critical concern, as the market seeks to understand how these policies are affecting inflation [3][5] Inflation and Pricing Dynamics - The core CPI's expected increase reflects potential tariff transmission effects, particularly in goods like appliances and furniture, while service prices remain weak [3][4] - The current labor market shows signs of cooling, with slower wage growth making consumers more sensitive to price changes, complicating retailers' decisions on passing costs to consumers [4][5] - The interplay between consumer resilience and pricing pressure is crucial for the Federal Reserve's monetary policy decisions, especially with the next policy meeting approaching [4][5] Retail Sales and Economic Growth - Following the CPI data, the U.S. Commerce Department will release June retail sales data, which is expected to show a slight rebound after two months of decline [5] - Weak consumer spending momentum aligns with a cooling job market, and lackluster retail performance could support the narrative of a "soft landing" for the U.S. economy [5] - The upcoming CPI and retail sales data will provide a comprehensive view of the U.S. economy's current state, balancing rising inflation pressures against slowing growth [5]

Core Viewpoint - The Federal Reserve's Goolsbee expresses a preference to wait for market anxiety to ease before making a more confident judgment on whether the U.S. economy can achieve a soft landing [1] Group 1 - Goolsbee indicates that current market conditions are characterized by heightened anxiety, which may impact economic assessments [1] - The statement suggests a cautious approach from the Federal Reserve regarding future monetary policy decisions [1] - There is an implication that a clearer economic outlook may emerge as market conditions stabilize [1]

Group 1 - The focus of the global financial market has shifted back to the USD as investors are concerned about the timing of the Federal Reserve's interest rate cuts and the potential for a soft landing of the US economy [1] - The market sentiment has changed from a bullish outlook to a more cautious stance, with the USD index fluctuating around the 105 mark [1] Group 2 - Expectations for a shift in Federal Reserve policy have increased due to ongoing declines in US inflation and a cooling labor market, with over 70% of market bets on a 25 basis point rate cut in September [2] - The USD index has retreated from its yearly high of 107 to around 105, leading to a rebound in non-USD currencies, particularly the Euro, Pound, and Yen [2] Group 3 - Despite the USD's decline, the US economy remains resilient, with strong consumer spending and technology sector investments, suggesting that any rate cuts by the Federal Reserve may be gradual and aimed at risk management rather than responding to a recession [3] - Future USD movements are likely to reflect a range-bound pattern, benefiting from economic stability while being constrained by rate cut expectations [3] Group 4 - The current USD pullback presents new opportunities for investors, with non-USD currencies expected to continue their rebound in the short term [4] - Long-term, global risk aversion is likely to support the USD's position, especially amid ongoing geopolitical risks [4] - Investors are advised to monitor key data releases such as CPI, PPI, and non-farm payrolls, and adjust their positions flexibly to avoid chasing market trends [4]

Group 1 - The core viewpoint of the report is centered around "Dollar Shift: Strategic Decision-Making," emphasizing the favorable conditions for risk assets due to global policy easing, a likely soft landing for the US economy, and a weakening dollar [1][4][21] - The report recommends an overweight position in global equities, particularly increasing the allocation to Asian (excluding Japan) stocks, while maintaining a positive outlook on US stocks due to strong earnings [1][4][21] - In the bond market, the report anticipates a weaker dollar and favors 5-7 year US dollar bonds, as well as an overweight position in emerging market local currency bonds, which are expected to benefit from a soft dollar and potential interest rate cuts by emerging market central banks [1][4][29] Group 2 - The macroeconomic outlook suggests an increased probability of a soft landing for the US economy, with expectations of potential interest rate cuts by the Federal Reserve in the second half of 2025, supported by loose monetary and fiscal policies [2][4][30] - Gold is highlighted as an important diversification tool, with central bank demand expected to support its price, especially when bonds may not perform well [2][30] - The report discusses various asset allocation models, multi-asset income strategies, and insights on client concerns, providing a multi-dimensional analysis of the global market [2][4][46] Group 3 - The report indicates that the dollar is expected to weaken over the next 6-12 months, benefiting the euro, yen, and pound, while the Swiss franc may remain range-bound [1][24][29] - Historical data suggests that a weak dollar typically supports stock performance, particularly for non-US equities, leading to a positive outlook for global stock markets [1][25][28] - The report emphasizes the importance of diversification in investment strategies, particularly in light of potential volatility and geopolitical risks [1][4][30]

Core Investment Strategies and Asset Allocation - The report recommends an overweight position in global equities, particularly in Asian markets (excluding Japan), due to expected earnings growth, policy support, and attractive valuations [2][19] - Non-USD bonds are to be increased, with emerging market local currency bonds being upgraded to overweight due to the anticipated weakening of the USD and significant room for central bank rate cuts [2][19] - Gold is positioned as a core asset, benefiting from de-dollarization, central bank purchases, and inflation hedging, with a 3-month target price of $3,400 [2][19] Macroeconomic Outlook and Risks - The core scenario anticipates a soft landing for the US economy, supported by trade truce, fiscal stimulus, and a projected 75 basis points rate cut by the Federal Reserve in the second half of the year [3][17] - Key risks include the potential end of the tariff suspension in July, Middle Eastern conflicts possibly driving oil prices above $100, and the implications of the proposed Section 899 tax on multinational investments [3][27] Asset Class Views - The USD is expected to weaken over the next 6-12 months, benefiting the Euro, Yen, and Pound, with specific targets set for currency pairs [4][20] - Gold is projected to have upward potential, with a 12-month target of $3,500, while oil prices are expected to stabilize around $65 per barrel, although geopolitical tensions could cause short-term spikes [4][27] - The stock-bond model has shifted to neutral, indicating a mixed outlook for equities, with emerging market local currency bonds requiring caution due to potential short-term reversals [4][24] Key Events and Outlook - Important upcoming events include tariff negotiations in July, central bank meetings in Europe and the US, and the IMF annual meeting in October [5][17] - The report emphasizes the importance of long-term investment principles, diversification, and balancing liquidity, growth, and protection needs in the context of the dollar's transition [5][19]