Trading ideas and investment strategies discussed herein may give rise to significant risk and are not suitable for all investors. Investors should have experience in relevant markets and the financial resources to absorb any losses arising from applying these ideas or strategies. >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst under the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions. BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 10 to 12. The Flow Show Liquidity = Inequality Scores on the Doors: oil 8.0%, commodities 4.0%, US dollar 2.2%, stocks 0.9%, cash 0.3%, HY bonds -0.2%, IG bonds -1.4%, gold -2.6%, gov bonds -2.9%, crypto -4.8% YTD. Winners & Losers: asset/ETF winners… cannabis 28%, uranium 16%, Japan (unhedged) 8%, oil 8%, semis 7%, Magnificent Seven 4% vs losers… rare earths -19%, renewables -17%, electric vehicles -15%, China tech -11%, ARKK -12%, Korea -11% YTD. Tale of the Tape: record $12.1bn inflows to EM equities ($11.9bn to China) as PBoC eases after China stocks hit Oct'08 GFC lows & exodus of foreign investors; epic deflation of property stocks (Chart 4) makes China the world’s most enticing contrarian long “trade” (no-one believes it’s an “investment”). The Price is Right: Q4 US nominal GDP up hot 6% YoY, up sizzling 40% since COVID low (fastest expansion since stagflationary '70s – Chart 3)… the “government bubble” huge driver… fiscal deficit 7.5% of GDP under Biden, 6.6% under Trump, both biggest since Great Depression/WW2 (Chart 7)… neither likely to campaign on “balancing the budget”. The Biggest Picture: Goldilocks macro, Goldilocks yields (10-year UST 3¾% to 4¼%), US stocks surging to new highs driven by monopolistic tech as AI “baby bubble” grows (Chart 2); rates, penetration, regulation 3 catalysts that pop tech bulls/bubble; regulators on prowl but need US 10-year real rates back to 2½% (currently 1¾%) to pop this one. Chart 2: Tech Bubbles popped by Rates, Penetration and/or Regulation History of asset bubbles Source: BofA Global Investment Strategy, Bloomberg BofA GLOBAL RESEARCH More on page 2… ARKKAI0%100%200%300%400%500%600%700%800%900%1000%'77'80'83'86'89'92'95'98'01'04'07'10'13'16'19'22'25Gold JapanAsiaInternetHousingChinaFAANGBiotechBitcoin1600%1200%1400%25 January 2024 Investment Strategy Global Michael Hartnett Investment Strategist BofAS +1 646 855 1508 michael.hartnett@bofa.com Elyas Galou >> ...
