BofA says these trades combine seasonals for 3Q, the month and the presidential cycle

Bank of America’s seasonality work suggests the Nasdaq 100 has risen in every third quarter since 2018, with July strengthening about 68% of the time (average +1.72%) but September typically weaker. The firm favors a defensively tilted trade mix: long U.S. equities and the U.S. dollar while shorting Treasurys and commodities, citing third-quarter USD/BRL gains about 2/3 of the time (+4.73% avg) and USD/ZAR gains about 2/3 of the time (+2.74% avg). On rates and commodities, BofA expects overseas yields to ease in July–August (e.g., German Bund yields down ~64% of the time; Australian 10-year down ~65%) and flags copper strength in July (NYMEX copper up ~65% of the time; avg +1.84%).

Analysis

This is a tactical positioning signal, not a fundamental change in earnings power. The cleanest expression is still Nasdaq-heavy risk assets: if systematic and discretionary flows lean into a familiar July pattern, the marginal buyer shows up first in QQQ/NDX constituents and in products tied to index momentum. That helps NDAQ more than BAC because exchange and market-data monetization can pick up with turnover and derivatives activity, while a stronger dollar and softer yields are not an obvious net positive for bank NII unless capital markets volumes improve materially.

The second-order effect is cross-asset crowding: a dollar bid and lower developed-market yields can pressure commodities and EM FX even if U.S. equities hold up. That means the trade is less about chasing broad beta and more about owning the relative winners of a risk-on/deflationary mix: U.S. large-cap growth, U.S. dollar liquidity, and select market-structure names. The main risk is that a hot inflation print or hawkish Fed communication flips the script quickly, because this setup has little room for higher real yields.

Contrarian view: seasonality is most dangerous when it becomes consensus, and late-summer positioning is already prone to de-risking. The best edge is likely front-loaded in July and early August; September is where the payoff can vanish. If DXY fails to hold a breakout or if the 10-year Treasury yield starts trending higher instead of lower, the seasonal basket is probably wrong and should be cut rather than averaged into.

Key Decisions for Investors

• Tactical long QQQ vs SPY or IWM for the next 4-6 weeks; the relative-value framing is better than an outright equity long because it isolates the Nasdaq seasonality while limiting macro beta. Falsify if QQQ underperforms SPY by ~2% or if real yields reaccelerate.
• Long UUP or front-month DXY futures into July as the cleanest expression of the dollar leg; keep size modest because this is a seasonal trade, not a structural FX view. Exit if DXY loses the prior breakout and commodity FX (BRL/ZAR proxies) stop underperforming.
• Small tactical long NDAQ on pullbacks, not a chase at market highs. The upside comes from higher trading/derivatives activity and index-product flows if the seasonal rally persists; the risk is that low-vol grind rallies do not lift market-structure revenues enough to matter.
• Do not force a BAC long from this note. BAC is more exposed to the rate path and credit cycle than to the seasonal equity setup; if anything, a quick move lower in yields helps only if it comes with steadier capital-markets volumes.
• Use the back half of August as the decision point: if the seasonal bid has not broadened by then, de-risk ahead of the typical September fade rather than waiting for confirmation.