The global market is undergoing an adjustment triggered by external shocks, and investors are facing two core questions: when will this round of correction bottom out, and whether the current macro environment is replicating the stagflation nightmare of the 1970s.
On March 7th, Bank of America Merrill Lynch's latest &#34;Flow Show&#34; weekly report provided a relatively optimistic but conditional judgment: signals of the end of the correction are emerging, but not fully in place yet; and the 2020s are more likely to head towards inflationary prosperity rather than a stagflation collapse—provided that geopolitical tensions do not worsen further.
According to the analysis by Bank of America Merrill Lynch strategist Michael Hartnett's team, this round of correction was triggered by external shocks combined with excessive optimism. Currently, there are signs of some &#34;oversold&#34; assets hitting bottom, but oil prices and the dollar have not yet given a comprehensive reversal signal, and the S&amp;P 500 index has not experienced sufficient price clearing (such as breaking below 6600 points).
Meanwhile, Bank of America's bull-bear indicator remains high at 9.2 in the extremely bullish range, indicating that market sentiment has not truly cooled down, thus limiting the rebound potential.
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A piece of news from NVIDIA has also shaken the market: NVIDIA stated that its previously announced $100 billion investment in OpenAI &#34;is not in the plan,&#34; and the current $30 billion financing arrangement may already be the upper limit. This statement is seen as a potential signal of a slowdown in the exponential growth of AI capital expenditures, which cannot be ignored in its impact on tech bonds and the software sector.
<h2>When will the correction end? Four conditions, two currently met</h2>
Bank of America Merrill Lynch believes that a market correction triggered by external shocks against a backdrop of excessive optimism typically needs to meet four conditions to be declared over:
<blockquote>
<ul>
<li>First, &#34;oversold&#34; assets hit bottom (software, MAGS, private credit, bank loans, Bitcoin);</li>
<li>Second, &#34;overbought&#34; assets are sold off (gold, semiconductors, metals, emerging markets, Europe, bank stocks);</li>
<li>Third, &#34;safe-haven assets&#34; lose buying support (oil prices and the dollar);</li>
<li>Fourth, there is a real price clearing.</li>
</ul>
</blockquote>
Currently, the first two conditions have begun to manifest. Fund flow data supports this judgment: This week, gold experienced its largest single-week outflow since October 2025 ($1.8 billion), while the energy sector recorded the largest single-week inflow in history ($7 billion), as investors are &#34;chasing into&#34; previously overbought sectors. However, oil prices and the dollar have not shown significant declines, and the S&amp;P 500 has not undergone sufficient price washing.
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Bank of America Merrill Lynch clearly pointed out that it is not advisable to expect a significant rebound before the dollar's trend becomes clear. The dollar index is the best barometer of global liquidity—if the dollar decisively breaks through 100, it will mean a deepening of the &#34;liquidity peak&#34; theme, further compressing the expectations for interest rate cuts in 2026 (the market's probability of a Federal Reserve rate cut on June 17 has dropped from 100% on January 1 to 37%), and may trigger a flattening of the yield curve and inflationary oil price shocks.
From the perspective of capital flows, this week saw the largest outflow from U.S. stocks in six weeks ($13.9 billion), while Japanese stocks recorded the largest single-week inflow since October 2025 ($4.2 billion). South Korean stocks experienced extreme volatility, with a record single-day inflow of $6.1 billion on March 2, followed by a record single-day outflow of $4.7 billion on March 4.
<h2>Will the 2020s Repeat the Stagflation Scenario of the 1970s?</h2>
This is one of the most controversial macro narratives in the current market. Bank of America Merrill Lynch's position is: The 1970s are the closest historical reference for the 2020s, but the two are not entirely equivalent, and under the baseline scenario, the 2020s are more likely to head towards inflationary prosperity rather than a stagflation collapse.
The logic chain supporting inflationary prosperity is clear: political populism (the non-establishment party vote share in the UK elections jumps from 27% in 2024 to 69% in 2026), tariffs and immigration policies reversing globalization, excessive fiscal expansion, compromises in Federal Reserve policy, and the &#34;too big to fail&#34; nature of the stock market leading to asset and wealth inflation.
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These factors collectively create inflationary pressure, but government intervention will suppress the rise in bond yields, ultimately manifesting as a weaker dollar rather than a significant rise in long-term interest rates. In this scenario, commodities, physical assets, international stocks, and small-cap stocks are the main beneficiaries.
However, the history of the 1970s still warrants caution. Bank of America Merrill Lynch has outlined the complete context of that period:
<blockquote>
<ol>
<li>From 1970 to 1972, the Nixon administration created prosperity through aggressive fiscal and monetary easing, with the stock market soaring over 60%;</li>
<li>From 1973 to 1974, out-of-control inflation combined with oil shocks led to a 45% drop in the stock market;</li>
<li>From 1975 to 1976, after the first wave of inflation receded, assets rebounded, with small-cap and value stocks replacing the &#34;Nifty Fifty&#34; as the new leaders;</li>
<li>From 1977 to 1980, the Iranian Revolution triggered a second wave of inflation, causing the stock market to decline again by 26%, until the Volcker shock finally ended it.</li>
</ol>
</blockquote>
In the current context, Bank of America Merrill Lynch believes the key variable lies in the situation in Iran. If the conflict is brief and oil prices remain below $90 per barrel, the narrative of inflationary prosperity holds, and commodities, emerging markets, and small-cap stocks will benefit after the restart of the dollar bear market; if the conflict extends (blockade of the Strait of Hormuz, Iranian attacks on regional oil infrastructure), and oil prices break through $100 to $120 per barrel, then asset allocation will tilt towards oil, the dollar, U.S. technology, and global defense, with energy-importing markets like Japan, South Korea, and Europe facing the heaviest pressure
From the perspective of asset performance &#34;puzzle&#34; since the 1970s, gold and commodities have consistently ranked at the top of the return charts throughout the entire stagflation period, while stocks and bonds have shown mixed performance. This historical pattern has already been reflected in the current market—from 2026 to date, oil prices have risen by 30%, gold has increased by 18.3%, commodities overall have risen by 22.6%, while the S&amp;P 500 has only slightly increased by 0.3%, and Bitcoin has dropped by over 16%.
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<h2>NVIDIA Abandons $100 Billion Deal, Cracks in AI Capital Expenditure Narrative Emerge</h2>
NVIDIA stated this week that its previously announced $100 billion investment in OpenAI &#34;is not in the plan,&#34; and the current $30 billion financing arrangement may be the last one. The market significance of this statement far exceeds the transaction itself.
Bank of America Merrill Lynch pointed out that the peak price of software ETFs coincided with NVIDIA's announcement of this investment in September 2023. Now, NVIDIA's withdrawal is a potential leading signal of a slowdown in the exponential growth of AI capital expenditures.
Once this trend is confirmed, it will become the best catalyst for reversing two major trades: the first is the &#34;short technology bonds&#34; trade (represented by the widening Oracle CDS spreads); the second is the &#34;long semiconductors, short software&#34; trade (i.e., the &#34;AI reverence &gt; AI poverty&#34; logic).
Bank of America Merrill Lynch emphasized that the bottoming of the software sector is crucial, as it is highly correlated with the trends in private credit and bank loans. This week, bank loan funds experienced the largest outflow in three months ($900 million), and the bank loan ETF (BKLN) was close to the &#34;credit event&#34; critical area. Strategists believe that maintaining the $80 level for software ETFs and the $20 level for the bank loan ETF, which is the February low, is key technical support for current market stability.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/cb6a20f5-3b33-4cfc-b30d-d84185047d59.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/cb6a20f5-3b33-4cfc-b30d-d84185047d59.png"/>
It is worth noting that the Bank of America Merrill Lynch bull-bear indicator is currently still in the extremely bullish range of 9.2, issuing a sell signal. A global fund manager survey shows that emerging markets, European stocks, and bank stocks are still in a state of severe overweight, which means that if the market declines further, the selling pressure on these assets cannot be underestimated

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NVDA

Signals of a global market pullback are beginning to emerge but are not yet fully in place: the two conditions of oversold assets hitting bottom and overbought assets being sold have been met, but oil prices and the dollar have not reversed, and the S&P 500 has not fully cleared. The benchmark scenario for the 2020s leans towards inflationary prosperity rather than 1970s-style stagflation, with key variables being the situation in Iran and the direction of oil prices. NVIDIA's withdrawal from a $100 billion AI investment may indicate a slowdown in AI capital expenditure growth

- Global markets are adjusting due to external shocks, with investors questioning when this downturn will bottom out and whether the current macro environment is reminiscent of the stagflation of the 1970s.  
- According to Bank of America Merrill Lynch, signs of a market rebound are appearing, but the geopolitical situation needs to stabilize for the economic outlook to shift towards inflationary growth rather than stagflation.  
- Nvidia's recent decision to retract its $100 billion investment in OpenAI signals a potential slowdown in AI capital expenditures, which could significantly impact technology stocks and private credit markets.

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When will the global market correction end? Will the "2020s market" replay the "1970s" stagflation script?