Bank of America strategists, headed by Michael Hartnett, are urging investors to position for a set of five preferred trades in the second quarter: curve steepeners, China, consumer cyclicals, chips, and commodities.
In a client note, the strategists captured their recommendation succinctly: "'Money does grow on Cs'…we continue to recommend curve steepeners, China, consumer cyclicals, chips, commodities as best Q2 trades," underlining the emphasis on assets and regions beginning with the letter C.
The team contends that Wall Street appears to be embracing a narrative of a renewed nominal economic boom. They say the market is discounting several political and geopolitical developments that could underpin this outlook:
- a likely political pivot by Donald Trump toward affordability in advance of the midterm elections;
- a potential China-U.S. trade détente expected in May;
- and a geopolitical drive to secure control over critical supply chains - notably chips, rare earths, minerals and oil - framed as necessary to win the artificial intelligence competition.
Alongside those dynamics, the strategists point to a U.S. administration willingness to support strategic domestic companies, and the prospect of the United States underwriting allies that can supply oil and semiconductors in exchange for dollars and Treasury securities. These policy and geopolitical contours feed directly into the team’s case for commodities and chip-related exposure.
Linked to the commodities recommendation, Hartnett is explicit: "buy natural resources." He argues that robust portfolio returns so far this year are prompting allocators to raise previously low allocations to the asset class.
To illustrate the backdrop for that call, the strategists highlight the performance of BofA’s so-called "permanent portfolio." That portfolio is equally weighted across four buckets - stocks, bonds, cash and commodities - with a 25% allocation to each. According to the note, this permanent portfolio is tracking a 26% year-to-date return, which the strategists note is the best calendar-year start since 1933 and ranks as the third-largest outperformance versus a traditional 60/40 stock-bond mix in the past century.
Fund flow data cited by the team add further context for the recommendations. For the week to April 22, global equity funds attracted $25.9 billion, with U.S. equities drawing $18 billion and marking a fourth straight week of inflows. The strategists say equity inflows year-to-date are annualizing at a record $1 trillion.
On the fixed-income side, investment-grade bond funds recorded $12.4 billion of inflows for the week, tracking an annualized record pace of $434 billion. Alternative and safe-haven assets also registered moves: crypto pulled in $1.7 billion - the largest weekly inflow in seven weeks - while gold collected $900 million. Conversely, money market funds experienced $19.8 billion of outflows.
Sector and regional flow details highlighted by BofA include a $1.3 billion inflow into telecoms - the largest since January - and $1.2 billion of outflows from Korea that brought the two-week total to a record $3.7 billion. Japan saw its fourth straight week of equity outflows at $800 million, Europe posted a second consecutive week of outflows at $1.1 billion, and emerging market stocks recorded $6.5 billion of outflows for a second week running.
Market sentiment indicators remain in neutral territory. BofA’s Bull & Bear indicator was unchanged at 6.3, down from extreme bullish readings above 8.0 that the strategists observed in the fourth quarter of last year and in early 2026.
This combination of policy signaling, geopolitical positioning and ongoing fund flows forms the basis for the five trades the strategists recommend for Q2. Investors focused on these themes should weigh positioning across rates, equities tied to China and consumer cyclicals, chip-related supply chains, and commodity exposures, mindful of the flow-driven market dynamics the strategists describe.