The S&P 500 is up 0.6% this month and 14% year-to-date, supported by excitement about AI and expectations of a Fed rate cut, although it is squeezed by volatility and uncertainty.
According to BofA Securities, investor sentiment was affected by the US government shutdown, regional bank issues, and trade tensions with China, leaving market risks elevated.
Markets are now focused on the potential Trump–Xi meeting and whether the threat of new tariffs will be extended, in addition to fiscal pressures in the US, France, and Japan.
BofA expects the Fed to provide only guidance on monetary policy at its meeting later this month, and is seen as likely to end quantitative tightening (QT) due to money market tensions.
Amidst the uncertain global macro environment, BofA advises investors to hedge against risky currencies, and use floating rate liabilities in the euro.
