Deflation Assets vs. Inflation Assets

Deflation Assets vs. Inflation Assets Is the 40-year bull market in bonds over? Deflation Assets: government bonds, U.S. investment grade, S&P 500, U.S. consumer discretionary, growth and US high yield.Inflation Assets: TIPS, EAFE, U.S. banks, value and cash. Image: BofA Global Investment Strategy

Year to Date Fund Flows

Year to Date Fund Flows Many investors placed their money in US money market funds and high yield ETFs. Image: BofA Global Research

Inflation Assets vs. Deflation Assets

Inflation Assets vs. Deflation Assets The leadership remains deflationary, and the laggards remain inflationary. Deflation assets: government bonds, U.S. investment grade, S&P 500, U.S. consumer discretionary, growth and US high yield. Inflation assets: TIPS, EAFE, U.S. banks, value and cash. Image: BofA Global Investment Strategy

The Performance of “Deflation Assets” vs. “Inflation Assets”

The Performance of “Deflation Assets” vs. “Inflation Assets” Interesting chart showing the performance of “Deflation Asset” vs. “Inflation Assets” since 1960. “Deflation Assets”: Government Bonds, US Investment Grade, S&P 500, US Consumer Discretionary, Growth and US High Yield “Inflation Assets”: TIPS, EAFE, US Banks, Value and Cash Image: BofA Merrill Lynch

Valuation – S&P 500 Next-Twelve-Months P/E Multiple

Valuation – S&P 500 P/E Multiple The current high valuation of the S&P 500 is a topic of concern for some investors. This high valuation may be challenging to sustain unless yields decline significantly. Image: Goldman Sachs Global Investment Research

U.S. Dollar vs. Japanese Yen (USD/JPY)

U.S. Dollar vs. Japanese Yen (USD/JPY) When yields on U.S. Treasury bonds are higher than those on Japanese government bonds, it can lead to a weakening of the Japanese yen relative to the U.S. dollar. Image: BCA Research

FMS Investors – Net % Expecting Lower Long-Term Rates

FMS Investors – Net % Expecting Lower Long-Term Rates Only 38% of FMS investors expect bond yields to decrease, while the majority anticipate stable or potentially higher bond yields. Image: BofA Global Fund Manager Survey

Cumulative Cross Asset Flows in % of AUM Terms

Cumulative Asset Flows in % of AUM Terms In 2023, there has been a notable trend of strong inflows into “risk-free” assets, indicating a growing preference for low-risk investment options in an environment of higher yields. Image: Deutsche Bank Asset Allocation

Importance of Macro Driver in Explaining Returns

Importance of Macro Driver in Explaining Returns Higher real 10-year UST yields can potentially lead to a decrease in U.S. stock returns, but other factors should also be considered. Image: Goldman Sachs Global Investment Research

IG and HY Bond Fund Flows

IG and HY Bond Fund Flows It is common for investors to prefer investment-grade (IG) bonds over high-yield (HY) bonds when seeking lower-risk investments. Image: BofA Global Investment Strategy