In a twist on Wall Street’s traditional market plumbing, some of the biggest names in finance used a crypto blockchain to trade US Treasuries for digital dollars — on a Saturday https://t.co/7IDPppeph6 ...

Investment Rating - The report maintains an Overweight (OW) rating on US stocks, Treasuries, and US Investment Grade Corporate Credit, while recommending a focus on quality assets [4][5][6]. Core Insights - The report highlights a global growth slowdown due to the imposition of tariffs by the US, which is expected to impact demand and supply dynamics across various regions [2][8]. - Despite the anticipated slowdown, the report does not foresee a global recession, citing a strong starting point for growth entering the year [2]. - The US GDP growth is projected to decline from 2.5% in 2024 to 1.0% in both 2025 and 2026, with global growth expected to decrease from 3.5% to 2.5% in the same period [2][9]. Economic Outlook - The report anticipates a step-down in global growth, with specific forecasts indicating a 2.5% growth rate for 2025 and 2.8% for 2026 [9]. - Inflation rates are projected to be 2.1% for global inflation in 2025 and 2.0% in 2026, with the US expected to see inflation rates of 3.0% and 2.5% respectively [9]. Sector Recommendations - In the US, the report favors quality cyclicals, large caps, and defensives with lower leverage and cheaper valuations [6]. - For Japan, the focus is on domestic reflation and corporate reform beneficiaries, as well as companies involved in defense and economic security spending [6]. - In Europe, the report suggests repositioning into resilient sectors such as defense, banks, software, telecoms, and diversified financials [6]. - Emerging Markets (EM) recommendations are skewed towards financials and domestic-focused businesses over exporters and semiconductors/hardware [6]. Equity Valuations - The report provides specific price targets and earnings per share (EPS) estimates for major indices, including S&P 500 at 6,000 with a target of 6,500, and MSCI EM at 1,183 with a target of 1,200 [7]. - The expected EPS growth for S&P 500 is +7% for 2025 and +9% for 2026, while MSCI EM is projected to grow by +6% in 2025 and +10% in 2026 [7]. Currency and Interest Rate Forecasts - The report predicts a depreciation of the USD, with the DXY expected to fall by 9% to 91 by mid-2026 due to converging US rates and growth with global peers [14]. - US Treasury yields are expected to remain range-bound until late 2025, with significant rate cuts anticipated in 2026 [14][21]. Commodity Insights - Oil prices are expected to face downward pressure due to potential supply increases, with Brent prices projected to drop into the mid-$50s by 1H26 [16]. - Gold is highlighted as a top pick due to strong central bank demand and safe-haven appeal amid growth concerns [18].

Investment Rating - The report does not explicitly provide an investment rating for the industry or assets discussed Core Insights - Fiscal sustainability has gained increased attention from investors in the US, UK, and Japan, particularly regarding the US's persistent deficit and its impact on foreign demand for US assets [2][4] - The relationship between fiscal expansion and the Dollar is mixed, generally depending on the business cycle and monetary policy, but historically, greater US net issuance tends to be positive for the Dollar [4][5][21] - Concerns about fiscal sustainability and a declining appetite for US assets from foreign investors could lead to higher yields and a weaker Dollar, altering the historical relationship between fiscal expansion and currency strength [5][21] Summary by Sections Fiscal Risks and the Dollar - Investors are increasingly focused on fiscal sustainability, particularly in the context of the US's large and persistent deficit [2][4] - The effect of fiscal expansion on the Dollar varies, but on average, increased US net issuance is typically Dollar-positive due to structural foreign demand for Treasuries [4][5][14] Market Reactions - Pricing of US fiscal risks shows different implications across various foreign exchange (FX) pairs, with high-yielding currencies being more affected by steepening US yield curves [4][18] - A widening in US credit default swaps is often linked to underperformance in cyclical currencies [18][21] Historical Context - Historically, greater net issuance in the US has been associated with a stronger Dollar, but this relationship may not hold as foreign demand for US assets diminishes [5][14][21] - Other G4 economies do not exhibit the same positive relationship between net issuance and currency returns as seen in the US [10][11] Implications for Investors - Investors have accepted higher yields as compensation for holding US debt, but concerns about fiscal sustainability may now lead to a weaker Dollar as well [21] - The report suggests that the historical relationship between US issuance, foreign inflows, and the Dollar may begin to resemble that of other economies if current trends continue [14][21]

Investment Rating - The report indicates a positive investment sentiment towards US Treasuries, with strong inflows observed in this segment [2][4]. Core Insights - Global fund flows showed a net inflow into equities of $9 billion for the week ending April 23, an increase from $8 billion the previous week, driven by reduced outflows from US equity funds [4]. - In fixed income, net outflows were significantly reduced to $0.8 billion from $21 billion in the prior week, with government bond funds continuing to attract inflows [4]. - Emerging markets saw positive flows into mainland China funds, while Taiwan maintained strong net inflows [4]. - Cross-border FX flows turned positive, indicating an improved risk appetite among investors, favoring currencies such as USD, EUR, GBP, and CNY [4]. Summary by Category Equity Flows - Total equity inflows amounted to $68,079 million over four weeks, with a weekly inflow of $9,164 million [10]. - Developed markets saw inflows of $34,063 million, while emerging markets recorded inflows of $27,140 million, with mainland China leading at $24,686 million [10]. - Sector-wise, technology funds experienced the largest inflows of $14,845 million, while financials and healthcare saw significant outflows [10]. Fixed Income Flows - Total fixed income experienced outflows of $32,369 million, with government bonds attracting inflows of $29,366 million [10]. - High yield bonds faced substantial outflows of $23,488 million, while short-duration bonds saw inflows of $29,804 million [10]. FX Flows - Total FX flows recorded a net outflow of $4,751 million, with G10 currencies showing mixed results [12]. - The USD faced outflows of $3,440 million, while the EUR and GBP saw inflows of $2,880 million and $799 million respectively [12]. Fund Positioning - The report highlights a shift in fund positioning, with an increasing share of equity assets in total assets, indicating a growing preference for equities over fixed income [20][27]. - The share of money market fund assets as a percentage of global mutual fund assets has also seen fluctuations, reflecting changing investor sentiment [20].

Investment Rating - The report indicates a neutral investment stance with a BofA Bull & Bear Indicator reading of 4.8, slightly down from 4.9, suggesting a cautious approach to risk assets [7][48]. Core Insights - The report discusses the transition from "US exceptionalism" to "US repudiation," highlighting a significant shift in foreign ownership of US assets, with foreigners holding 33% of US Treasuries, 27% of US corporate bonds, and 18% of US stocks [1][10]. - The report emphasizes the impact of higher US yields leading to lower stock prices and a weaker US dollar, which is driving global asset liquidation [2][17]. - It suggests that the S&P 500 valuation floor of 20x has now become a ceiling, indicating a bearish outlook for US equities [1][25]. Summary by Sections Treasury Ownership - Foreign ownership of US Treasuries has reached 33%, with the financial sector holding 31% and the government 24% [3]. Market Flows - There was a significant inflow of $48.9 billion into equities, driven by a $70.3 billion inflow to passive funds, while bonds experienced a $20.8 billion outflow [11][26]. - The report notes the largest weekly inflow into Treasuries at $18.8 billion and the largest outflow from high-yield bonds at $15.9 billion [16][27]. Economic Indicators - The report indicates that the US household equity wealth has decreased by $8 trillion year-to-date, following a $9 trillion increase in 2024, reflecting a negative wealth effect [18][22]. - The S&P 500 is projected to be priced-in around 4800, with expectations of a short and shallow recession [22][25]. Investment Strategies - The report recommends being long on 2-year Treasuries and short on the S&P 500 until there is a significant policy response from the Federal Reserve or a resolution in the US-China trade tensions [2][17]. - It advises investors to focus on high-quality corporate bonds yielding 5-6%, equities with strong dividend yields, and to consider emerging markets and commodities as potential investments [25][26].