flow show-Banks, Bonds, Booms, Bubbles

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. 12855954 The Flow Show Banks, Bonds, Booms, Bubbles Scores on the Doors: Bitcoin 28.0%, gold 27.2%, stocks 10.8%, IG 6.7%, HY bonds 6.6%, govt bonds 5.3%, commodities 2.4%, cash 2.3%, oil -7.4%, US dollar -9.3% YTD. The Price is Right: Trump just fourth President to visit Federal Reserve (FDR 1st in 1937 to attend opening of Fed building); US govt spend = $7.1tn, i.e. US govt to spend $2.6bn (= Fed renovation) in next 3 hours & 12 mins; unwillingness/inability to reduce govt spend likely why Trump needs Fed to cut ($1tn interest payments stabilize if funds rate <3%), why next Fed governor likely to launch Yield Curve Control to control debt. Tale of the Tape: bank stocks YTD: Europe 62%, UK 37%, China 29%, Japan 24%, US 17%; banks best expression of 2025 flip from US to global fiscal excess; banks = risk-on until bond yields rise to levels that trigger lower banks; hasn’t happened yet (Chart 5) but vigilantes set to pounce if 30-year yields in UK >5.6%, US >5.1%, Japan >3.2%; interest costs up to 3% of UK GDP ($120bn), 4% of US GDP ($1tn), 4% of Japan GDP ($185bn). Tale of the Tape II: China H-shares quietly up 58% past 2 years, besting ACWI & SPX (40%); China only place bond yields down past 2 years, only place “60/40” working vs US, UK, EU, Japan where aversion to bonds keeps asset allocators long stocks & credit. The Biggest Picture: Wall St favoring Trump pivot to lower US tariffs, taxes, rates (SPX 9% YTD, besting Treasuries 3%, catching International 22%); in contrast, Main St less adoring: Trump job approval back near April lows (Chart 2); note Trump “bro billionaire” stocks up 71% since election, Trump small-cap “base” stocks -1% (Chart 3); why policy in too-big-to-fail mode, will intervene to prevent up inflation (tariffs), down jobs (AI). Chart 2: The Fork in Wall St & Main St S&P 500 vs. Trump approval rating Source: BofA Global Investment Strategy, Bloomberg BofA GLOBAL RESEARCH More on page 2… 6.1k5.0k6.4kJan 22nd52%45%48%46%44%45%46%47%48%49%50%51%52%53%480