Commodities, Chinese assets, and consumption recovery... Bank of America: The "4C" trades could become the hottest trend in the second half of the year!

Against the backdrop of a reshaping geopolitical landscape, ongoing disruptions to trade policy, and a shift in the U.S. political cycle, a “4C” trading portfolio centered on commodities, China assets, U.S. consumer stocks, and a steepening yield curve is poised to become the most explosive investment trend in the second half of the year.

According to the Chasing Wind Trading Desk, Bank of America Securities’ latest report, The Flow Show, notes that Trump’s approval rating has continued to slide (economic policy approval is only 37%, while inflation policy approval is even lower at 33%). This political logic points to a “short war” rather than a “long war” scenario, giving rise to the four trading themes above.

Meanwhile, the Bank of America bull-bear indicator plunged from 7.4 to 6.3, hitting a new low since June 2025; the week-on-week drop is also the largest since April 2025. The “sell signal” has been lifted. The main drag factors are a sharp net outflow from high-yield bonds and worsening breadth in global equity indexes.

In asset performance since the beginning of the year, crude oil leads with a 74.4% gain, commodities overall are up 45.6%, and gold is up 10.2%; meanwhile U.S. stocks are down 3.8% and Bitcoin has slumped 22.2%, showing that a switch in market style is already underway.

The bull-bear indicator falls sharply, and market sentiment turns cautious

This week, the bull-bear indicator drops to 6.3, the lowest level in the past ten months. It is mainly dragged by three pressures: worsening breadth in global equity indexes, outflows from high-yield bond funds, and widening spreads between high-yield bonds and sub-investment-grade bank bonds.

The reverse “sell signal” that was originally triggered on December 17, 2025 has been officially lifted on March 25, and the current signal has turned neutral.

Bank of America’s global breadth rules show that currently, 16% net of the constituent stocks in the MSCI global index are simultaneously trading below both the 50-day and 200-day moving averages, still far from the -88% threshold required to trigger a buy signal.

Current positioning data does not indicate a full liquidation by long positions, but any rebound that aims to break above 6800 points (50-day and 100-day moving-average resistance) faces substantial pressure. “Short on rallies” has now become the mainstream trading consensus in the market.

The “4C” framework: Four main lines to capture opportunities in the second half

Bank of America’s “4C” investment framework covers four interconnected trading directions.

A steepening yield curve: The yield on 2-year Treasuries failed to effectively break above 4% last week, signaling that the curve-flattening move triggered by the Q1 valuation risk shock has come to an end. Signs of a “cap” on 2-year interest rates, along with a weakening U.S. labor market, jointly support leaning into duration and positioning for a steepening curve.

Commodities: The logic of geopolitical competition for resources provides strong support for commodities. This week, Trump announced an increase in pharmaceutical tariffs and expanded tariff coverage for steel, aluminum, and copper, further reinforcing market pricing of resource scarcity.

China assets: The “U.S.-China May meeting” and the reshaping of China’s consumer spending structure are the core catalysts. Data shows that China residents’ consumption as a share of GDP remains far below that of the U.S., leaving significant room for rebalancing. China assets therefore have substantial upside elasticity for valuation repair.

U.S. consumer stocks: After the war ends, a major policy shift is expected, focused on addressing the issue of living costs. However, near-term liquidity flows are showing divergence: this week, the consumer sector saw outflows of $1.1 billion, the largest single-week outflow since December 2025. The allocation window for consumer stocks may not yet be open.

Soft landing or hard landing? Liquidity-sensitive assets are the barometer

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

There is a positive correlation between nonfarm employment data and the S&P 500’s 12-month forward earnings per share. With the backdrop that the S&P 500’s 2026 EPS forecast has already been raised from $310 at the beginning of the year to $323, if employment data remains strong over the coming months, it may help prevent earnings expectations from being revised downward alongside the stock price.

The decision points for distinguishing soft vs. hard landing are also clear. If “peak-liquidity-impaired assets” such as Bitcoin, private credit, software ETFs, and bank stocks can stabilize and rebound amid a backdrop of yields topping out and a steepening curve, then the probability of a soft landing is higher. If the above assets cannot find a bottom for a long time, the risk of a hard landing will rise significantly.

From a political perspective, Trump’s ongoing approval declines are re-pricing the landscape for the midterm elections—the probability Republicans keep the House has fallen to 15%, while the probability they keep the Senate has also slipped to 49%. The core policy risk for Q2 is that trade policy may again become a tool for the U.S. to apply pressure to achieve geopolitical goals.

Bank of America maintains its short position on AI data center bonds, and private-client stock allocations fall to a one-year low

Bank of America Global Wealth and Investment Management (GWIM) data shows that private clients manage assets of $4.1 trillion, with the equity allocation ratio dropping to 63%, the lowest since May 2025. The allocation ratios for bonds and cash rise to 18.6% and 11.0%, respectively, and both recorded net inflows this week.

“The skyscraper curse”—historically, the completion of the world’s tallest buildings often coincides with the peak of economic bubbles—leads Bank of America to believe that the hallmark of this cycle will not be the tallest building, but the largest AI data center. The Utah Delta Gigasite project is planned to provide more than 10 gigawatts of computing power, with construction starting in late 2025; the initial power supply is expected to be in place by 2027.

Based on this view, it maintains its stance of shorting corporate bonds of AI mega data center operators, and notes that Microsoft, Meta, and Oracle have recently carried out large-scale layoffs to raise capital expenditures for data centers, viewing this as a signal of worsening capital misallocation.

The above精彩 content comes from the Chasing Wind Trading Desk.

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