The global macro landscape is undergoing a profound restructuring. BofA Chief Investment Officer Michael Hartnett believes that stocks were the winner in the first half of the 2020s, but the market's main theme in the second half will shift from US stocks and the dollar to commodities.
Hartnett, in the latest issue of his Flow Show report, pointed out that six structural shifts are driving this rotation: globalization to nationalism, efficiency to well-being, the Fed from independent to subservient, open US borders to controlled borders, the AI arms race to disruption, and the US shift from services to manufacturing, coupled with dollar depreciation and excessive global fiscal expansion. Against this backdrop, commodities have become a tool for risk hedging and inflation hedging for asset allocators.
In recent market assessments, Hartnett's predictions have once again been validated – his previous sell signal accurately captured the interim high of the S&amp;P 500, and he subsequently almost timed the market bottom. Currently, he characterizes market sentiment as shifting from &#34;sell on strength&#34; to &#34;new highs in May,&#34; and anticipates that stock inflows will set new records in 2026.
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<h2>In the latter half of the 2020s, commodities, international stocks, and small-cap stocks will take the lead</h2>
Hartnett characterizes the current macroeconomic environment as a superposition of deep structural shifts. Against this backdrop, he judges that market leadership in the second half of the 2020s will transfer from the dollar and large-cap US stocks to commodities, international stocks, and small-cap stocks. He wrote, commodities now serve as both risk and inflation hedges, while the dollar only retains its value as a bear market hedge. Factors such as tariff shocks, the loosening of NATO order, and threats to the petrodollar cycle by OPEC all pose long-term headwinds for the dollar.
Hartnett also stated that he is still willing to buy 30-year US Treasuries at a yield of 5%, viewing it as a contrarian investment opportunity similar to stocks in 2008 and commodities in 2018. However, he admitted that government bonds are more likely to see a bear market rally rather than a true bull market until voters truly turn to fiscal discipline. Politicians still need to appease voters with full employment, and fiscal expansion will continue to push up nominal GDP; US nominal GDP has already risen by 60% in six years.
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<h2>Policy panic is the bottom, and the real risk is policy failure</h2>
Hartnett paraphrased James Carville's famous quote, adapting it to &#34;Now it's the stock market's turn, James,&#34; to explain his core judgment: the panic of policymakers is often a signal for the market to stop falling. He pointed out that since the 2008 global financial crisis, every bear market and correction on Wall Street has been reversed by policy easing.
This time is no exception. The S&amp;P 500 received a boost from ceasefire news after falling only 4% and being in oversold territory, subsequently rising for seven consecutive trading days. Hartnett believes that the stock market has effectively become &#34;too big to fail,&#34; and the real risk for the market lies in policy failure – that is, a collapse of the dollar or bond market, or the outbreak of credit events.
From a political perspective, Trump's current overall approval rating is 41%, his approval rating on economic issues is 37%, and on inflation issues is 33%, all hitting new lows. However, these figures remain higher than Biden's corresponding lows in 2022. Hartnett infers from this that midterm election pressures will push policy towards easing to improve the affordability of living for ordinary people, which is a positive for consumer stocks.
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<h2>Fund flows indicate a recovery in risk appetite, but sentiment still has room to fall</h2>
Last week's global fund flow data showed that cash received $70.7 billion in inflows, stocks received $36.8 billion, bonds $8.7 billion, gold $3.5 billion, and cryptocurrencies $0.2 billion.
Hartnett pointed out that two major long-term fund trends since 2008 remain solid: passive investing continues to outperform active investing, with cumulative net inflows into equity ETFs reaching $7.1 trillion, while long-term equity funds have seen cumulative net outflows of $3.4 trillion; corporate bonds continue to outperform government bonds, with investment-grade bond funds having net inflows of $2.7 trillion, while US Treasury funds have only seen net inflows of $0.9 trillion.
The BofA Bull &amp; Bear indicator currently stands at 6.3, in neutral territory – the inverse &#34;sell signal&#34; triggered on December 17th ended on March 25th. Hartnett advised that the April fund manager survey to be released next Tuesday will be an important reference.
He noted that if an extreme pessimistic reading occurs, similar to the &#34;Liberation Day&#34; after last April – when global growth expectations fell to a 30-year low of -82%, cash allocation rose to 4.8%, and equity allocation fell to -17% – it would constitute a &#34;buy with eyes closed&#34; signal. Although sentiment is currently pressured, it is still a considerable distance from extreme levels. At the market bottom last May, the Bull &amp; Bear indicator's low point was 3.4, far below the current 6.3.

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BofA Chief Investment Officer Hartnett believes that stocks ruled the first half of the 2020s, and the market's main theme will shift to commodities in the latter half. Six major structural shifts are driving this rotation: globalization to nationalism, in the US, efficiency to well-being, the Fed from independent to subservient, open US borders to controlled borders, services to manufacturing, and the AI arms race to disruption, coupled with dollar depreciation and excessive global fiscal expansion. Commodities have become tools for risk hedging and inflation hedging

- Michael Hartnett of Bank of America identifies a significant macroeconomic shift, predicting commodities will lead the market in the latter half of the 2020s, moving away from U.S. stocks and the dollar.  
- Hartnett argues that current structural changes, including nationalism and inflation concerns, diminish the dollar's long-term value, while commodities offer risk and inflation hedges.  
- Recent fund flows indicate a rising risk appetite, but market sentiment remains cautious, with key indicators suggesting potential buying opportunities if pessimism escalates.

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BofA's Hartnett: Winners of the first half of the 2020s were stocks; the next five years will belong to commodities