Investment Newsletter – April 2025
In BofA’s latest Flow Show note, the Chief Investment Officer maintains a cautious yet strategic stance for 2025, reaffirming his core trade idea of staying long on Bonds, International Stocks, and Gold, referred to as BIG. Despite a recent risk-on rally driven by what he terms the 3Bs, which include a sharp 50 basis point jump in Treasury yields, a decline in Trump’s approval ratings, and a five trillion dollar market cap loss among the Magnificent 7 tech giants, he advises investors to sell into strength in the S&P 500, viewing the rebound as unstable. Looking ahead, he believes a sustained rally depends on the emergence of the 3Cs, namely improved relations with China, actual rate cuts by the Federal Reserve, and continued resilience in consumer spending. As these supportive factors have yet to materialize, his outlook remains defensive and globally diversified.
Tony Pasquariello of Goldman Sachs describes the current market environment as one defined by rapid shifts in narrative and heightened uncertainty, with the long-standing theme of US exceptionalism now in sharp decline. Markets remain stuck in a broad trading range, reacting heavily to daily headline noise, particularly around trade tensions and central bank communications. While the macroeconomic outlook remains unclear, technical signals and fund flows have improved. Hedge funds and systematic strategies have shifted from selling to buying, and corporate demand is starting to return during the earnings season. Pasquariello expects continued choppy movements, with gap-up and gap-down price action that favors short-term trading strategies such as buying on dips and selling into rallies. Despite this, he highlights that equity valuations remain elevated, with the S&P 500 still trading at around twenty times earnings, even though assumptions of a stable economy, high profit margins, and consistent buybacks are now under pressure.
China’s stronger-than-expected first quarter GDP growth of 5.4 percent was driven by front-loaded export orders ahead of Trump’s tariff hikes, but the momentum is expected to fade as the full impact of tariffs exceeding 145 percent sets in. Economists from UBS and Goldman Sachs have revised down their 2025 growth forecasts, citing significant pressure on exports and rising domestic challenges such as weak consumption and a troubled property sector . Beijing is likely to respond with further fiscal and monetary stimulus to support demand, while continuing to diversify trade away from the US toward ASEAN and other partners. For investors, caution remains warranted on export-dependent sectors, with greater focus on policy-supported areas like domestic consumption and regional supply chains. Ongoing trade tensions and geopolitical risks also support selective allocation to alternative assets such as gold and Bitcoin.
Bitcoin is approaching a potential breakout supported by ongoing strategic reallocation away from US assets, as concerns over US policy credibility and financial system risk increase. A new all-time high is expected in the second quarter, with additional gains likely during the summer . The year-end target remains at 200,000 US dollars. Key signals include the rise in US Treasury term premium, regional trading flows based on time-of-day analysis, and continued accumulation by large Bitcoin holders. Movement from gold ETFs into Bitcoin ETFs would suggest that Bitcoin is increasingly viewed as a superior hedge against financial system risks. Upcoming 13F filings may reveal growing participation from long-term investors such as pension funds and sovereign wealth funds. The passage of US stablecoin legislation during the summer is also expected to strengthen the asset class and support further price growth.
