the flow show-Q4 Pain Trades - Inflections

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. 12745383 The Flow Show Q4 Pain Trades & Inflections Scores on the Doors: gold 28.3%, stocks 18.2%, crypto 12.3%, HY bonds 8.5%, commodities 7.3%, IG 5.2%, cash 4.1%, oil 2.9%, govt bonds 1.5%, US dollar 0.6% YTD. The Biggest Picture: 26 global rate cuts in Sept = 4th biggest month of monetary stimulus this century (Chart 2)…why long-end of yield curve not unhinged by inflationary Fed & China + massive $0.5tn Sept US & EU bond issuance. Tale of the Tape: “softy” Sept payrolls (125-175k) = “range-y” bond yields = risk-on; “tails” are recessionary payrolls <75k (U-rate >4.3%)...30-year heads below 3¾%, blowout payrolls >225k (U-rate <4.1%)...GT30 heads above 4½%...both risk-off (Chart 6). The Price is Right: bulls in control but corroborating bullish “tells” would be China 10-year bond yield >2%...China stimulus working, private equity PSP >$70…Fed cuts = soft landing, natural resources GNR >$60 & regional banks KRE >$55…rate cuts = growth acceleration; in contrast bearish “tells” would be 30-year Treasury yield <3.9% = rising hard landing risk, SOX (semiconductors) <4.8k = tech leadership breaking down, and if Hang Seng (world’s best performing equity market in ‘24) can’t sustain rally above 21500 (200-week MA), well… Chart 2: September 2024 was 4th biggest month for central bank policy rate cuts this century Monthly number of global central bank policy rate cuts Source: BofA Global Investment Strategy, Bloomberg. Large sample of 100+ central banks. BofA GLOBAL RESEARCH More on page 2… 0102030405060'01'03'05'07'09'11'13'15'17'19'21'23'25Monthly number of global central bank policy rate cutsMar'20 = 49 cutsSep'24 = 26 cutsDec'08 = 27 cutsMar'09 = 28 cutshistorical avg = 6 cuts03 October 2024 Investment Strategy Global Michael Hartnett Investment Strategist BofAS +1 646 855 1508 michael.hartnett@bofa.com Elyas Galou >> Investment Strategist BofASE (France) +33 1 8770 0087 elyas.galou@bofa.com Anya Shelekhin Investment Strategist BofAS +1 646