the flow show-Invisible Hand to Visible Fist 0905

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 13 to 15. 12873739 The Flow Show Invisible Hand to Visible Fist Scores on the Doors: gold 35.1%, bitcoin 18.4%, stocks 15.0%, HY bonds 8.6%, IG 8.6%, govt bonds 6.3%, commodities 3.8%, cash 2.9%, US dollar -9.3%, oil -11.7% YTD. Zeitgeist: “Only thing stopping the Nikkei going to 60k is our domestic politics,” Tokyo investor; “Surprise will be Xi-Trump deal trading China FX appreciation for lower US tariffs sending Hang Seng well above 30k,” Singapore investor. The Price is Right: UK long bond yield 5.6% (highest since ‘98), France 4.4% (highest since ‘09), Japan 3.2% (highest since ’99), US tests 5%; risk assets chill, discounting PKO (Price-Keeping Operations) policies to prevent disorderly jump in debt costs (e.g. YCC, QE, Operation Twist); we long gold into YCC & say lower yields (PKO + Fed credible rate cuts) = broadening of stock market via bond sensitives (biotech, REITs, small cap). Tale of the Tape: watch the price action not the number…most bullish outcome for risk assets = strong >150k Aug payroll and Treasury yields fall (the full Goldilocks)…most bearish for risk assets = -ve payroll and Treasury yields rise (on debt default risks). The Biggest Picture: Nixon ‘70-‘74 analog: political pressure on Fed/FX to ease financial conditions for pre-election boom = risk-on, Mag7-on (Nifty 50 back then), UST yields lower until 2nd wave inflation; Nixon analog says ‘25/’26 “price controls” needed to stop inflation…long sectors that “outpace China”, short sectors that “whip inflation”. Chart 2: The Nixon Analog Dow Jones Industrial Average and Fed funds rate (inverted) from 1968 to 1975 Source: BofA Global Investment Strategy, Bloomberg BofA GLOBAL RESEARCH More on page 2… Nixon electedPenn Central bankruptcyNew Economic Plan, end of Bretton WoodsNixon winsre-electionOil shockNixon impeachedFranklin National bankruptcyBurns Fed chairbig Fed easingbig Fed easing3%5%7%9%11%13%55060065070075080085090095010001050'68'69'70'71'72'73'74'75Dow Jones Industrial AverageUS Fed funds rate (mm