Investment Rating - The report maintains a very bullish investment rating with a BofA Bull & Bear Indicator at 9.0, indicating a favorable outlook for equities despite recent outflows from tech stocks and emerging market debt [13][36]. Core Insights - The report emphasizes a strategy of "long boom, short bubble," suggesting that investors should focus on value cyclicals while reducing exposure to high-risk assets [18]. - It highlights the significant inflows into cash and bonds, with $148.5 billion flowing into cash and $11.1 billion into bonds, indicating a cautious market sentiment [10][16]. - The report notes that geopolitical tensions are driving investors to seek hedges, particularly in energy and materials, with Venezuela and the Arctic being key areas of interest due to their substantial oil reserves [2][18]. Summary by Sections Market Performance - Year-to-date performance shows Bitcoin at 4.1%, gold at 2.9%, global stocks at 2.9%, and US stocks at 1.5%, while oil has declined by 1.7% [1]. - The report indicates that historically, oil has been the best-performing asset three months following a war, with returns of 8.3% [3]. Investment Flows - Recent flows indicate $2.2 billion into stocks, $1.1 billion into gold, and $1.1 billion into crypto, while there were significant outflows from US stocks ($19.0 billion) and emerging market debt ($6.0 billion) [10][16]. - The report notes that private clients have shifted their allocations, with a focus on high dividend stocks, munis, and REITs, while selling bank loans and tech stocks [12]. Asset Allocation Strategy - The recommended strategy for 2026 includes long positions in bonds, international stocks, and gold, while shorting investment-grade bonds and the US dollar [19]. - The report suggests that the optimal time to go long is when market sentiment is bearish, and the Fed is easing, which aligns with current market conditions [17]. Geopolitical Context - The report discusses the geopolitical landscape, noting that the US's shift from exceptionalism to expansionism could favor a contrarian long position on the US dollar [2]. - It highlights the potential for safe-haven demand to spread to the US dollar due to geopolitical tensions, particularly in relation to oil prices [18].