Three market hurdles in August: Stay alert to risks

研报英文原文证据摘录

Three market hurdles in August: Stay alert to risks

Accessible version

Japan Insight: BofA Strategy Monthly

Three market hurdles in August: Stay alert

to risks

Investment Strategy

27 July 2026

Hurdles in Aug: Crude oil, the Fed & position concentration Investment Strategy

The sell-off of AI stocks was as fierce as a “summer storm.” The initial round of selling Japan

may well have run its course, but three hurdles stand in the way of the August market

(the risk of higher crude oil prices, the risk of a hawkish Fed and the risk of an unwinding Masashi Akutsu >> Strategist

of equity and FX positions). We have not completely lowered our guard, including on the BofAS Japan

market as a whole. +81masashi.akutsu@bofa.com3 6225 7754

The renewed surge in crude oil prices was in all likelihood a miscalculation for many Tetsuhiro Tokuyama >> Strategist

investors. The prevailing view is that the midterm elections will rein in President Trump's BofAS Japan

hardline stance, but clear evidence of this has yet to emerge. There is also a risk that +81tetsuhiro.tokuyama@bofa.com3 6225 8499

higher crude oil prices will further harden the Fed's stance. We believe the sell-off in AI

stocks was also related to a shift in the market's perception of the Fed. Higher crude oil

prices become a factor for yen depreciation through a worsening fiscal position and

trade balance, and a more hawkish Fed. FX hedge selling by overseas investors buying

Japanese equities has also gained momentum, and factoring in position concentration in

equities, this is reminiscent of the eve of August 2024 when volatility spiked. In the near

term, risks look likely to concentrate toward the end of July. That said, we believe that

the market can recover once it clears these hurdles.