Commodities, Chinese assets, consumer recovery... Bank of America: The "4C" trade may become the strongest trend in the second half of the year!

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Against the backdrop of geopolitical realignment, ongoing trade policy disruptions, and the shift in the US political cycle, the "4C" trade portfolio—centered on commodities, Chinese assets, US consumer stocks, and yield curve steepening—may become the most explosive investment opportunity in the second half of the year.

According to Chase Wind Trading Desk, Bank of America Securities’ latest Flow Show report indicates that as Trump’s approval ratings continue to decline (approval for economic policies at only 37%, inflation policy support even lower at 33%), political logic is now pointing to a "short war" scenario rather than a "long war" one, spawning these four trading themes.

Meanwhile, the Bank of America Bull & Bear Indicator plunged from 7.4 to 6.3, hitting a new low since June 2025 and marking the largest weekly drop since April 2025. The "sell signal" has been lifted. Large net outflows from high-yield bonds and deteriorating breadth in global equity indices are the main drags.

Year-to-date, crude oil leads asset performance with a 74.4% surge; commodities are up 45.6% overall; gold gained 10.2%. US stocks are down 3.8%, and Bitcoin plunged 22.2%—a clear shift in market style has emerged.

Bull & Bear Indicator Slides Sharply, Market Sentiment Turns Cautious

Bank of America’s Bull & Bear Indicator fell this week to 6.3, a ten-month low, dragged by three pressures: deteriorating breadth in global equity indices, outflows from high-yield bonds, and widening spreads between high-yield and subordinated bank bonds.

The reversal "sell signal" originally triggered on December 17, 2025, was officially lifted on March 25; the current signal is neutral.

Bank of America’s global breadth rule shows that currently a net 16% of MSCI global index constituents have simultaneously broken below both their 50-day and 200-day moving averages—still far from the -88% threshold needed to trigger a buy signal.

Current positioning data does not show full liquidation of longs, but any rebound attempting to breach 6,800 points (resistance at the 50-day and 100-day moving averages) faces significant pressure; "sell into strength" has become the mainstream trading consensus.

"4C" Framework: Four Main Lines for Second Half Opportunities

Bank of America’s "4C" investment framework encompasses four interrelated trading directions.

Yield Curve Steepening: The 2-year US Treasury yield failed to decisively break above 4% last week, marking an end to the curve-flattening trend driven by Q1 valuation risk shocks. Signs of a "ceiling" for 2-year rates and a weakening US labor market both support going long duration and betting on curve steepening.

Commodities: Geopolitical resource competition provides strong support for commodities. This week, Trump announced higher tariffs on pharmaceuticals and expanded tariffs on steel, aluminum, and copper, further reinforcing the market’s pricing of resource scarcity.

Chinese Assets: The "US-China May summit" and restructuring of China’s consumption are core catalysts. Data show China’s household consumption as a ratio of GDP remains well below the US, indicating substantial room for rebalancing and valuation recovery for Chinese assets.

US Consumer Stocks: Major policy shifts are expected once the war ends, focusing on tackling cost-of-living issues. However, there is a short-term divergence in fund flows: Consumer sector outflows totaled $1.1 billion this week—the largest weekly outflow since December 2025—suggesting the window to allocate to consumer stocks may still be closed.

Soft Landing or Hard Landing? Liquidity-Sensitive Assets as Indicators

The market’s core dilemma now centers on the interaction between employment and corporate earnings.

Non-farm payroll data correlates positively with the S&P 500’s 12-month forward earnings per share. With the S&P 500’s 2026 EPS estimate rising from $310 at the start of the year to $323, continued strong jobs data in coming months could prevent earnings expectations from being revised lower alongside share prices.

Points of judgment for soft vs. hard landing are similarly clear: If “peak-liquidity impaired assets” such as Bitcoin, private credit, software ETFs, and bank stocks can stabilize and rebound amid peaking yields and curve steepening, a soft landing is more likely; if these assets fail to find bottom support, hard landing risk will rise significantly.

Politically, Trump’s steadily falling approval rating is repricing the midterm election picture—the probability Republicans hold the House is now only 15%, and holding the Senate has dropped to 49%. The core policy risk of Q2 is trade policy once again becoming a US tool for geopolitical goals.

Bank of America Maintains Short AI Data Center Bonds; Private Client Stock Allocations Near Annual Lows

Bank of America Global Wealth & Investment Management (GWIM) data shows private client managed assets at $4.1 trillion, with equity allocations down to 63%, the lowest since May 2025; bond and cash allocations are up to 18.6% and 11.0%, both recording net inflows this week.

"Skyscraper Curse"—historically, completion of the world’s tallest buildings coincides with economic asset bubble peaks. Bank of America believes that this cycle’s emblem won’t be the tallest building, but the largest AI data center—the Utah Delta Gigasite project, set to provide over 10 gigawatts of computing power, will commence construction at the end of 2025, with first phase power delivery expected in 2027.

Based on this view, Bank of America maintains its short stance on corporate bonds of AI hyperscale data center operators, noting that Microsoft, Meta, and Oracle have all recently conducted large layoffs to raise data center capex, viewing this as a sign that capital misallocation is intensifying.

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The above highlights are from Chase Wind Trading Desk.

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