A weaker yen can boost exports and tourism profits The Japanese Yen hasn't been at these levels vs the US dollar since the late 1980s. There are two key drivers of this Yen weakness. One is the interest rate spread. The second, and probably more important longer term, is structural outflows from Japan and the biggest component of this is outward FD…

What's old is new again: bundling streaming services Entertainment and theme park spending growth has been weaker as demand normalizes from the post-reopening surge. But despite difficult comps, domestic attendance for key parks is flat to up with small and new attractions as a key driver. Indeed, we will get an important major new attraction in Or…

Buy now pay later slowing but still disrupting Rising card delinquency rates, particularly among lower income consumers, are one of several pieces of data that have led some to take a negative view of the US consumer. But Mihir suggests delinquency rates have started to decline recently and discusses why that's been the case. Ultimately, employment…

A slow but steady hand on the cut button The eventual impact of higher rates on credit, the rise of private capital, slow loan growth and forthcoming tighter regulations have all weighed on bank multiples to varying degrees. But these attractive multiples relative to history, combined with a view that rates probably have peaked, keep Ebrahim Poonaw…

Strong demand and difficult supply Over the last two decades, copper demand was inexorably linked to China. At times, China accounted for 110% of global copper demand growth. Now, countries are rebuilding their supply chains at home, building data centers and decarbonizing. While the source of copper demand has changed, demand growth remains compel…

Millennial home buying continues but in some new places New home sales are down only marginally from 2021 levels despite mortgage rates rising roughly 300bps over that period. Demand from Millennials entering peak home buying age, wealthy boomers and domestic migration have helped to offset affordability challenges created by higher rates. Existing…

Big portion of retailers hoping for lower rates Home improvement retail has been challenged by a number of factors of late, from pandemic pull-forward to weakness in existing home sales to inflation that's crowding out other spending. Lower rates would help and millennial home buying continues to provide some support for sales. Robby discusses the …

AI: Hardware Today, Software Tomorrow Corporate investments in AI have had significant impact on the financials of certain semiconductor and server companies, but while software providers stand to benefit from AI investments too, the technology hasn't yet shown up in the profits of these companies in a meaningful way. Alkesh Shah draws parallels be…

Higher rates broadening the converts issuance market Convertible bonds (CBs) can offer equity-like returns with downside protection thanks to the coupon and the ability to redeem most CBs at par. Thus far in 2024, CB issuance has been active, well ahead of levels seen the last few years. Michael discusses the reasons for such an active issuance yea…

Earnings improvement is still fairly nascent In 2023, we saw an earnings recession, at least in the first half of the year, despite GDP growth that was ahead of trend. Back then, companies were adapting to higher rates, weaker demand and climbing costs, which weighed on earnings. Ohsung Kwon expects earnings growth to look much better in 2024. This…

Data trends are approaching Fed threshold for rate cuts The latest economic data releases this year suggest the labor market remains strong but is cooling and the consumer is resilient in the face of sticky inflation, especially on the services side of the economy. Michael Gapen says the rebound in the labor force, labor participation and net migra…

Transports would ride the cycle but modes matter Transport metrics had been in an extended downturn for around 18 months. Demand was depressed, inventory levels were high and end demand for goods had faded from COVID highs. But more recently there are signs of stabilization in some of the data tracked by BofA Global Research, partly because truckin…

A number of things can go right for Europe Earlier this month, BofA Securities hosted a Global Investor Summit in Rome, Italy. In attendance were corporate executives, prominent investors, policy experts, members of BofA management and several BofA Global Research strategists. Topics ranged from private capital to understanding central banks to the…

Global growth matters for Emerging Markets At the start of the year, markets were pricing in three rate cuts by June and now, the likelihood of one cut by June is close to 50/50 based on market implied probabilities. But while delayed rate cuts complicate the bull case for Emerging Markets (EM), David Hauner does point out that expectations for cut…

ESG topics still impacting stocks and there's more to come US ESG funds faced a challenging 2023, seeing net outflows of around $7.1 billion, but strong markets meant that assets under management grew strongly. In the US, ESG regulations have historically been market driven, unlike the specific directives in the EU, but more recently the regulatory…

Rate policy isn't the only big Fed change likely for '24 Since emerging from the COVID pandemic, the Fed has contracted the size of its balance sheet, also known as Quantitative Tightening (QT). They've done this by allowing their Treasury holdings to mature without reinvesting the proceeds. This has placed upward pressure on yields, all else equal…

GLP-1 impact should be big but lots of puts and takes Almost 40% of US adults are obese and the US healthcare system spends nearly $173 billion a year on obesity-related medical costs. In the past, exercise and diet regiments were the best solutions for combating obesity but now there's an injectable called a GLP-1. These drugs trigger receptors in…