Wall Street Ends Higher as S&P 500, Nasdaq Extend Gains Ahead of Holiday Week 
IMF Reaches Staff-Level Agreement With Egypt, Opening Path to $3.8 Billion in Funding 
German Exports to the U.S. Decline Sharply as Tariffs Reshape Trade in 2025 
Asian Stocks Rise as Wall Street Tech Rally Lifts Markets, Yen Slumps Despite BOJ Rate Hike 
Gold Prices Surge to Record Highs as Geopolitical Tensions Fuel Safe-Haven Demand 
U.S. Stock Futures Rise Ahead of Holiday-Shortened Week as AI Optimism Lifts Tech 
UK Economy Grows 0.1% in Q3 2025 as Outlook Remains Fragile 
Trump Defends Economic Record in North Carolina as Midterm Election Pressure Mounts 
Oil Prices Climb in Asian Trade as Venezuela Sanctions and Middle East Tensions Fuel Risk Premium 
South Korea Central Bank Warns of Rising Financial Stability Risks Amid Won Volatility 
EU Approves €90 Billion Ukraine Aid as Frozen Russian Asset Plan Stalls 
Kevin Hassett Says Inflation Is Below Target, Backs Trump’s Call for Rate Cuts 
Yen Slides as BOJ Caution Undercuts Rate Hike Impact 
Global Markets Rise as Tech Stocks Lead, Yen Strengthens, and Commodities Hit Record Highs 
Platinum Price Surges Past $2,000 as Demand and Supply Dynamics Tighten 
Oil Prices Ease in Asia as Geopolitical Risks Clash With Weak Demand Outlook 
Despite a recent rally in Chinese equities, many investors remain uncertain about its sustainability. Bank of America (BofA) strategists suggest the potential for a re-rating of Chinese stocks. However, U.S. mutual funds appear underprepared for a sustained rally. Of the 50 S&P 500 stocks most sensitive to the MSCI China index, only 13 are overweight in aggregate fund holdings, indicating investors are more prepared for a brief uptick or a "head-fake" than a prolonged surge in China-exposed equities.
Fed Rate Cuts and a Shift Toward Equity Income
With expectations of the Federal Reserve cutting interest rates by around 2 percentage points, BofA predicts retirees might shift their cash from money market funds into higher dividend-yielding equities. However, large operators (LOs) have increasingly favored long-term growth (LTG) stocks over those with high dividend yields. This shift is evident in the record-low aggregate dividend yield of fund holdings compared to the S&P 500. Additionally, retail investors have been leaning towards tech and growth stocks, with four of the top five most widely held stocks in Merrill accounts being tech-related.
Defensive Stance Despite Economic Optimism
While BofA economists have raised their GDP and earnings forecasts through 2025, both long-only (LO) and hedge funds (HF) remain defensively positioned. Despite the Fed starting an easing cycle, these funds continue to hedge against potential economic downturns. BofA contends that this "double-stimulative" environment—where both profits and rate cuts are at play—could favor cyclical stocks over defensive ones, potentially positioning value stocks to lead as profits improve.
Tax Loss Harvesting: Potential Volatility in October
BofA anticipates that October could bring about tax loss harvesting, a strategy employed since the Tax Reform Act of 1986. Historically, stocks that fall 10% or more by the end of September tend to underperform the S&P 500 in October by 85 basis points. According to BofA, these trends may create headwinds for certain stocks before a potential rebound in November.
