The Flow Show Steel Cage Match...Bessent vs ABB

The Flow Show Steel Cage Match...Bessent vs ABB

Scores on the Doors: oil 53.0%, global stocks 13.9%, US stocks 11.6%, gold 4.0%, HY 20 August 2026 bonds 2.6%, cash 2.3%, US dollar 0.6%, IG 0.1%, govt bonds -1.1%, bitcoin -16.9% YTD. Investment Strategy Global Zeitgeist: “I mean if private credit can’t rally on QE5 then what is the world coming to.”

Tale of the Tape: US admin currently 0-for-3 on “3 arrows” of 3% GDP growth (<2% growth past 6 quarters), 3% budget deficit as % GDP (it is currently 6% of GDP), oil production increase of 3 million barrels per day (up 0.3mbpd since ‘24); policy credibility measured by bonds & FX...higher yields & weaker currency means credibility falling.

The Price is Right: succession of “Bessent puts” to stop “Anything But Bonds” threat Michael Hartnett to US government/AI financing...US dollar swap lines with Asia/Gulf, FX intervention on Investment Strategist yen, now quasi-QE via doubling long bond buybacks with Fed acquiescence; policy panic BofAS to “fix” fixed income should cap but not reduce US bond yields...preferred longs: gold (obvs), and unloved long duration REITs/XBI/regional banks/small cap/HK property. Anya Shelekhin Investment Strategist BofAS The Biggest Picture: QE the genesis of great bull market & “too big to fail” Wall St conviction; extraordinary monetary stimulus past 20 years have led to extraordinary asset gains (Chart 2); would thus be extraordinary if fresh round of QE fails, if Bessent Myung-Jee Jung Investment Strategist can’t drag 30-year yield below 5%...means US dollar slump and short risk, short leverage BofAS (AI hyperscalers, private credit), short cyclicals (financials) into midterms. Chart 2: Extraordinary monetary stimulus…extraordinary asset gains Jessica Guo Investment Strategist New York Stock Exchange Composite Index (log scale) BofAS New York Stock Exchange Composite Index (log scale) 10.25 QE5 QE1 QE2 OT QE3 QE4 10.00 Chart 1: BofA Bull & Bear Indicator Up to 9.5 from 9.3 9.75

9.25 4 6 Buy 2 8 Sell Extreme Extreme Bearish Bullish

8.50 Source: BofA Global Investment Strategy. The indicator identified above as the BofA Bull & Bear Indicator is 8.25 intended to be an indicative metric only and may not be '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 used for reference purposes or as a measure of performance for any financial instrument or contract, or Source: BofA Global Investment Strategy, Bloomberg otherwise relied upon by third parties for any other *QE = quantitative easing; OT = “Operation Twist” 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: $40.1bn to stocks, $21.4bn to bonds, $3.8bn to gold, $1.0bn to crypto, $1.2bn from cash.

• US Treasuries: $7.4bn inflow, largest in 6 weeks (Chart 13),

• IG bonds: $7.5bn inflow, 20th week of inflows,

• EM debt: $3.3bn inflow, largest in 11 weeks,

• US equities: $28.9bn inflow, largest in 3 weeks,

• Korea equities: $0.8bn outflow, 1st outflow in 8 weeks (Chart 14),

• Japan equities: $1.7bn outflow, 1st outflow in 11 weeks,

• Semiconductors: $0.7bn outflow ($6.3bn outflow past 3 weeks – Chart 12),

• Financials: $2.0bn outflow, biggest in 11 weeks.

BofA Private Clients: $4.7tn AUM…66.5% stocks, 16.9% bonds, 9.4% cash; biggest weekly inflow to bonds since May’26; past 4 weeks, private clients buying Japan, muni bond & TIPS ETFs, selling EM debt, utility & financial sector ETFs.

BofA Bull & Bear…