Wishy Warshy Investment Strategy

Global Research Highlights Wishy Warshy

Doved and Confused 31 July 2026

The Fed stayed on hold as expected at its July meeting. Hammack, Kashkari and Logan Global dissented in favor of a hike. Things got really interesting for markets at the press Investment Strategy conference. Warsh evaded a lot of questions but made a few starkly dovish remarks. BofAS First, he opened the door for looking at other inflation indicators besides PCE. Second, Derek Harris he suggested there could be other tools besides hikes to fight inflation. Third, he implied Portfolio Strategist BofAS that markets have done some of the Fed’s tightening work for it. Markets responded by questioning the Fed’s credibility: long-end yields, and the dollar sold off substantially. Ironically, BofA Economists think the need to re-establish credibility increases the Thomas Hopkins Portfolio Strategist probability that the Fed will hike in September, all else equal. Therefore, they remain BofAS comfortable with their forecast that the Fed will hike by 25bp each at its remaining three meetings this year. Evan Morris Portfolio Strategist BofAS Earnings growth remains strong

Results from 134 S&P 500 companies (37% of index earnings) are now in. 80% beat EPS expectations – similar to 3Q25, the strongest post-week 2 beat rate since 2021. 2Q S&P 500 EPS growth jumped to 36% YoY, driven primarily by investment mark-ups at Google. Excluding this one-time gain, growth is tracking 24% YoY, up 2ppt since July 1st. Top Macro reports Savita Subramanian continues to expect underlying growth to move up to her +28% YoY US Watch 2 Aditya Bhave forecast as more companies report. While it is still early, guidance trends have held up BofA on USA 3 well so far this reporting season. Month-to-date (MTD), companies have issued 1.3x Shruti Mishra more above- than below-consensus EPS guides, stronger than the historical average of US viewpoint 4 1.0x in July. The 3-month guidance ratio is tracking 1.9x, the highest level since 2021. Stephen Junea Earnings revisions remain healthy, with 1.5x more upward than downward revisions to BofA Securities Equity Client Flow Trends 5 Jill Carey Hall, CFA FY1 EPS in July, led by Info Tech and Financials. Earnings Tracker 6 Savita Subramanian Funds are still flowing 4th week of inflows: Last week (S&P 500 -0.6%), clients were big net buyers of US Top Industry reports equities (4th straight week of buying), led by record single stock inflows ($8.2bn) and Integrateds, Refining, and Midstream 7 slight equity ETF inflows ($0.5bn). Clients bought equities across size segments. Buying Jean Ann Salisbury was driven by institutional clients (their biggest buying week since Dec. 2020 / 2nd US Banks 8 largest in our data history since ’08). Retail clients were also buyers (for the 5th straight Ebrahim H. Poonawala week) while hedge fund clients sold equities for the 3rd straight week. Clients bought Top Company reports stocks in 8 of 11 sectors, led by Tech, Financials and Industrials. Industrials. Microsoft Corporation 9 Tal Liani Consumers are still spending Clean Harbors Inc 10 Total card spending per household was up 4.1% y/y in the week ending Jul 25, according Nandita Nayar to BAC aggregated credit & debit card data. The pickup from last week was partly driven by higher gas prices following the re-escalation of the US-Iran conflict. Ex-gas spending rose a more modest but healthy 3.3% y/y. Department stores spending growth saw the biggest increase vs last week

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 16. Analyst Certification on page 12. Price Objective Basis/Risk on page 11.

US Watch July FOMC review: Doved and confused

29 July 2026 US Economics: So dovish… The Fed stayed on hold as expected at its July meeting. Hammack, Kashkari and Logan Macro United States dissented in favor of a hike. Things got really interesting for markets at…