The RIC Report: Rotate into relative value

研报英文原文证据摘录

The RIC Report: Rotate into relative value

Rallies of 10-40% in sectors like communications, tech, semiconductors, and other

growth stocks have reversed in June (Exhibit 5). Investors kept buying small caps and

started buying the losers: financials, down as much as 12% YTD, are now positive on the

year, and health care stocks reversed a 7% drawdown into 7% gains.

Exhibit 5: Tighter Fed, loose capex spenders spark an H2 reversal Exhibit 6: A generational transfer in free cash flow is taking place

Total return of selected assets in 2026 12m forward FCF of “hyperscalers” and semiconductor companies, $bn

Financials 450

Health care Semiconductor companies

US small caps Since June 350 Hyperscalers

Transportation

January-May

US value stocks 250

US growth stocks

43%

Semis 150

Discretionary

24%

Tech 50

Energy

Comms Svcs 26%

-50

-10% -5% 0% 5% 10% 15% 2007 2012 2017 2022 2027

Source: BofA Research Investment Committee, Bloomberg Source: BofA Research Investment Committee. Hyperscalers = AMZN, GOOGL, META, MSFT, ORCL.

BofA GLOBAL RESEARCH Semiconductor companies = NVDA, MU, AVGO, & AMAT

BofA GLOBAL RESEARCH

Cash is a decaying asset

The reversal into “anything but AI” may continue. Household cash & equivalents total

$21tn, a level that is 33% above the pre-Covid trend (Exhibit 7).

In 2022-2023, 550bps of rate hikes sent T-bill yields briefly into positive territory on an

after-tax, after-inflation basis (Exhibit 8). Holding extra cash during the stagflationary

bear market was understandable. But the real yield now after taxes is -1%, and hoarding

a decaying asset amid a strong economy may get uncomfortable…bullish for equities and

credit.

Exhibit 7: Cash levels 1/3 higher than 2010s trend Exhibit 8: Cash yields are still negative after taxes, inflation despite