Stocks and bonds made up the bulk of flows last week, with European equity funds seeing their largest inflow since February 2023, Bank of America said in a note on Friday.
Stock funds attracted $11.9 billion, bonds $11.7 billion, while $3.7 billion exited money market funds, based on EPFR Global data cited by Bank of America.
Europe saw its third consecutive week of inflows, with the largest inflows since February 2023 reaching $1.1 billion.
Technology funds saw outflows over the past two weeks, totaling $900 million, their first consecutive outflow since April 2023. Meanwhile, utilities had their largest inflow since November 2022 at $700 million.
Strategists at Bank of America point out that the “anything but bonds” trade should reverse in the second half of the year, with 30-year US Treasuries acting as the best hedge against weaker nominal growth.
They note that credit and stocks are reacting bullishly to increased odds of a “soft landing,” but they believe the odds of a “hard landing” are very low, “given stagnant real retail sales, stalling of the global PMI rise, (and) labor market shift from… “Unambiguously strong” to “vaguely strong” to “ambiguous”.
US stocks remain in a “late secular bull market” with no change in leadership since 2009, and no recession to change it. Strategists also highlight that current valuations are not consistent with the start of a new bull run.
Regarding macroeconomic developments, Bank of America expects the US CPI to range between 3.75% and 4.5% by the US presidential election in November, while “the Fed wants to cut at the first opportunity.” Strategists noted that inflation in 2024 may prevent the Fed from cutting interest rates, thus extending tight monetary policy.
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At the regional level, the United States witnessed its fourth week of inflows worth $12.1 billion, while emerging market stocks witnessed its second week of outflows worth $2.5 billion, and Japan witnessed the resumption of outflows at $900 million.
In fixed income, investment grade bonds (IG) saw their lowest inflows in 21 weeks at $3.3 billion, high yield bonds (HY) saw their second week of inflows at $1.9 billion, and Treasuries saw their second week of inflows at $4.9 billion. and emerging markets. Debt inflows resumed at $400 million, and bank loans achieved their fourth week of inflows at $800 million.