Quantamental Insights: Rotation and reversion following an excursion

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Quantamental Insights: Rotation and reversion following an excursion

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Quantamental Insights

Rotation and reversion following an

excursion

Macro rotates and reverts as war and AI recede 10 July 2026

The dominant themes of the first half of 2026—AI enthusiasm and geopolitical risk— Quantitative Cross Asset Strategies

began to fade in June. As tensions in the Middle East eased and investors questioned AI Global

valuations, leadership rotated away from commodities and growth tech toward the dollar Andy Pham

and value-oriented sectors. The result has been a more skeptical and volatile market that FICC Quant Strategist

will require more persistent signals to meaningfully move out of recent ranges. BofAS+1 646 743 3365

apham3@bofa.com

Higher US dollar and rates on growth divergence Francisco Blanch

Resilient economic activity, continued AI capex, and a more hawkish Federal Reserve CommodityBofA Europe&(Madrid)Deriv Strategist

have pushed US real rates higher even as lower energy prices eased inflation pressures +34 91 514 3070

francisco.blanch@bofa.com

elsewhere. This has widened the gap between the US and the rest of the world,

especially on the back of AI capex supporting a stronger dollar relative to other TejEquity-LinkedSathe Analyst

developed economies. BofAS

+1 646 855 1620

tej.sathe@bofa.com

FX dynamics dominated by carry and momentum

Dollar strength re-emerged with rising real rates. Despite continued support for global

manufacturing from the AI cycle, FX performance remained driven primarily by rate

differentials, allowing carry to retain leadership while momentum benefited from

increasingly bullish dollar trends. As policy divergence widens, yields may continue to

matter more than exports in driving currency returns, supporting carry and momentum.