The Japanese Yen hasn't been at these levels vs the US dollar since the late 1980s. There are two key drivers of this Yen weakness. One is the interest rate spread. The second, and probably more important longer term, is structural outflows from Japan and the biggest component of this is outward FDI (foreign direct investment) activity by Japanese corporates. The weak yen has mixed effects, boosting export competitiveness and helping tourism revenue but the softer currency also increases Japan's import bill at a time when Japan has become more reliant on them. And over time, export volumes have become less sensitive to the weaker yen, resulting in diminished benefits for the economy, especially in the short term. Still, Izumi Devalier does expect improvement in the Japanese economy in 2H24 as wage increases hit. And if the Fed cuts in December, Yen weakness should be largely contained. A further delay in Fed cuts would add additional risk.

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Entertainment and theme park spending growth has been weaker as demand normalizes from the post-reopening surge. But despite difficult comps, domestic attendance for key parks is flat to up with small and new attractions as a key driver. Indeed, we will get an important major new attraction in Orlando next year. In streaming, viewers can expect to see more personalized ads and ads that allow for more direct purchasing. Combined with election spend, there's a good backdrop for ad spend in the second half of the year. Bundled content is back, in streaming form, and what's interesting is that these bundles are often combining content that's not related-like a slimmed down cable TV package of old. And while overspending on content remains a risk, some secondary sports deals are coming in below expectations and premier sports can drive viewership and advertising for other content areas. The opportunity in media remains significant and below expectations while premier sports can drive meaningful viewership.

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"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

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Rising card delinquency rates, particularly among lower income consumers, are one of several pieces of data that have led some to take a negative view of the US consumer. But Mihir suggests delinquency rates have started to decline recently and discusses why that's been the case. Ultimately, employment is a key driver for consumer credit and we'd be more concerned if the outlook for jobs deteriorated more rapidly. "Buy Now/Pay Later" or BNPL has enjoyed rapid growth in recent years, particularly among younger consumers, but a combination of higher rates and a weaker consumer has stalled growth. Mihir believes that BNPL is most challenging for the traditional private label card issuer market (e.g. department store cards), and will continue to gain market share. Mihir also discusses the mortgage insurance sector which has less credit risk than in the past given today's higher underwriting standards and because of the equity that many homeowners now have, owing to home price appreciation.

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2024 Bank of America Corporation. All rights reserved.