Markets unhinging is a feature not a bug

Global Equity Volatility Insights Markets unhinging is a feature not a bug

Markets unhinge in the bubble-era 04 August 2026

Vol & uncertainty continue to rise across micro and macro markets. All six Mag7 stocks Equity Derivatives that reported earnings realized moves greater than implied by vol markets, a first in the Global ChatGPT era. Tech stock dispersion surged to near dotcom era extremes amidst earnings and the Situational Awareness turmoil. And an unconvincing FOMC press conference created more questions than answers and drove long-end yields higher. While tech bubble builds can overcome such headwinds and uncertainty longer-term, shorter-term drawdowns and rotations into value are not unusual. How to hedge the near-term risks? XLV call spreads offer >4x max payout ratios to hedge continued Healthcare strength while being asymmetric in case of a sharp reversal, an increasing risk given the sector’s Global Equity Derivatives Rsch BofAS high BRI. Additionally, we think grind-lower trades like SPX put spreads and PDOs are Riddhi Prasad >> attractive downside hedges given today’s rotation-prone market and the steep put skew. Equity-Linked Analyst MLI (UK) Mind the Cap: Rotations reshaping European benchmarks Arjun Goyal Equity-Linked Analyst Rapid rotations across sectors, factors and individual stocks continue to reshape BofAS European equity benchmarks, with the upcoming Sep’26 STOXX reviews a key event for Lars Naeckter >> index changes. In the EURO STOXX 50, current projections point to ENGI and Nokia Equity-Linked Analyst Merrill Lynch (DIFC) replacing WKL and VOW3, reinforcing a growing shift towards Growth, Momentum and Nitin Saksena higher valuation multiples, much in line with global benchmarks. These changes should Equity-Linked Analyst modestly increase SX5E index volatility and weigh on dividend bottom-ups. Consistent BofAS

with this trend, rising concentration across European sectors is also making STOXX Abhinandan Deb >> Equity-Linked Analyst capping mechanics increasingly consequential. With several sector leaders now hovering MLI (UK) around key thresholds following recent weakness, September's review is likely to act less Benjamin Bowler as a traditional capping event and more as an "uncapping" exercise, redistributing Equity-Linked Analyst BofAS weights back toward dominant constituents and thus raising correlations with a tilt towards momentum exposure. Nicholas Dunne Equity-Linked Analyst Buying the AI bottleneck: 23x upside pot’l w/ 50% cushion BofAS See Team Page for List of Analysts We see an attractive opportunity to buy the 50-60% correction in leading MLCC manufacturers through a structure offering up to 23x upside potential with a maximum Exhibit 1: 3M volatility (2weeks chg) loss of 1.32% assuming the worst-performing stock does not fall another 50%. This Level & changes (in parentheses) in vol pts asymmetry is essential in a still high-risk segment of the AI ecosystem. Our trade combines Murata, Samsung Electro-Mechanics and Yageo, providing exposure to the key Implied Realized S&P ) hubs of global MLCC production across Japan, Korea and Taiwan. As AI servers become ESTX ) more power-intensive, MLCCs have emerged as a critical bottleneck in the AI hardware FTSE ) stack. We believe the recent drawdown offers an interesting entry point into one of the DAX ) most leveraged expressions of the AI infrastructure theme. NKY ) HSCEI ) Also in the GEVI KOSPI EEM US ) Global cross-asset stress rose for a fourth week as FX stress increased XIN9I ) Source: BofA Global Research Trading ideas and investment strategies discussed herein may give rise to significant risk and are BofA GLOBAL RESEARCH not suitable for all investors. Investors should have experience in relevant markets and the financial See list of acronyms at the end of the report 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.…