The Flow Show Credibility, Intervention & Liquidation

The Flow Show Credibility, Intervention & Liquidation

Scores on the Doors: oil 45.7%, intl stocks 8.7%, SPX 8.6%, cash 2.1%, US$ 1.6%, HY 31 July 2026 bonds 1.2%, IG bonds -1.2%, govt bonds -2.5%, gold -5.5%, bitcoin -26.1% YTD. Investment Strategy Global The Price is Right: credibility event...Fed nakedly dovish, so financial conditions to continue to tighten until Fed forced to restore credibility via aggressive hikes (= higher yields into Warsh @ Jackson Hole Aug 28th); we say retreat/rotate from risk assets rather than reload until higher inflation and one of those nasty “higher yields-lower dollar” vigilante events (Chart 5) forces monetary & fiscal policy U-turns.

Tale of the Tape: intervention event...US/Japan/Korea coordinated FX intervention most imp event of week as policy makers try to short-circuit risk of JPY collapse, JGB yield Michael Hartnett melt-up, contagion into Korea/Taiwan bonds, disorderly UST-negative capital Investment Strategist BofAS flows...better work; also shows new era of AI PKOs (price keeping operations)...US policymakers will act to prevent weakness in Japan/Korea/Taiwan stocks from impeding Anya Shelekhin race with China for AI supremacy. Investment Strategist BofAS The Biggest Picture: liquidation events...KOSDAQ (Korea small cap tech) @ Oct’22 lows (Chart 2), Mirae (largest Korea broker) -66% @ Jul’07 levels (Chart 3), stock price of Myung-Jee Jung many US retail darlings under water (e.g., SPCX 30%, NASA 36%, DRNZ 20%, DRAM Investment Strategist 10% below VWAP average investor entry point YTD), plus Situational Awareness; no big BofAS rally on lovey-dovey Fed + AI PKOs + liquidation...risk assets capped into mid-terms. Jessica Guo Chart 2: K-pop Investment Strategist Korea small cap tech stocks (KOSDAQ) BofAS Korean stocks (KOSDAQ) 1200 Chart 1: BofA Bull & Bear Indicator 1100 Down to 9.4 from 9.6 1000

800 4 6 Buy 2 8 Sell 9.4 700 0 10 Extreme Extreme 600 Oct'22 Jul'26 Bearish Bullish

Source: BofA Global Investment Strategy. The indicator 500 identified above as the BofA Bull & Bear Indicator is intended to be an indicative metric only and may not be 400 used for reference purposes or as a measure of '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 performance for any financial instrument or contract, or otherwise relied upon by third parties for any other Source: BofA Global Investment Strategy, Bloomberg purpose, without the prior written consent of BofA BofA GLOBAL RESEARCH Global Research. This indicator was not created to act as a benchmark. More on page 2… BofA GLOBAL RESEARCH

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Weekly Flows: $63.7bn to stocks, $12.5bn to bonds, $5.0bn to cash, $1.3bn to gold, $0.4bn from crypto.

• IG bonds: $5.8bn inflow, 17th week of inflows,

• Global equities: $63.7bn inflow, fearless buy-the-dip continues,

• US equities: $30.4bn inflow, largest in 6 weeks,

• China equities: $15.9bn inflow, largest 4-week inflow ever ($62.4bn – Chart 6),

• Korea equities: $1.6bn inflow, pace slowing but no day of Korea outflow in past week (Chart 7),

• Tech: $15.7bn inflow, largest 5-week inflow ever ($68.5bn – Chart 8),

• Semiconductor ETFs1: $5.3bn inflow, no reversal in big $53bn inflow YTD despite SOX -25% (Chart 9),

• Consumer: $0.6bn inflow, largest in 9 weeks.

BofA Private Clients: $4.5tn AUM…65.5% stocks, 17.5% bonds, 9.7% cash; private clients continue to add to stocks... equity ETF share count up 6.1% YTD, 0.6% past 4 weeks, and 0.3% in past week; in ETFs past 4 weeks, private clients buying municipal bonds, Japan equity, EM debt ETFs, selling low-volatility, bank loan…