Markets have seen significant capital flows into various asset classes over the past week, according to data compiled by Bank of America.
Stocks attracted $29.4 billion, bonds $10.3 billion, cryptocurrencies $1.1 billion, and gold $0.3 billion. At the same time, $2.9 billion was withdrawn from liquidity.
Cryptocurrencies saw the largest eight-week cumulative inflow on record, totaling $13.5 billion. This represents 30% of the total $45 billion inflows into the asset class since 2019, according to BofA’s Michael Hartnett.
Bank loan funds have also seen continued interest, with inflows over the past eight weeks, including $1.5 billion last week alone, representing the largest four-week inflow since February 2022.
U.S. stocks attracted a substantial $36.1 billion, generating the largest four-week inflow on record at $141 billion. In comparison, the last seven weeks have seen a stark contrast in capital movements between US markets and the rest of the world, with the US receiving $176 billion in inflows while the rest of the world has faced to capital outflows of $19 billion.
The financial sector saw its largest four-week inflow since January 2022, receiving $8.0 billion over the past month. Utilities, after five weeks of capital outflows, finally recorded an inflow of $0.4 billion, the largest in the last 11 weeks.
Bank of America’s Bull and Bear Indicator fell from 5.4 to 4.7, hitting an 11-month low. The drop, the largest weekly decline since March 2023, reflects capital and debt outflows, weak equity markets and increased liquidity levels.
The decline in this indicator, which represents a broad measure of global sentiment and positioning, from 7 to 5 over the past six weeks, highlights a significant disconnect between bullish sentiment on U.S. assets and bearish sentiment on U.S. assets. from the rest of the world.
Bank of America’s private clients, with a record $3.9 trillion in assets under management, are currently allocated 63.3% in stocks – a 30-month high – and 19.0% in bonds – a 27-month low.
These clients are on track to experience the largest three-month outflow from stocks since the second quarter of 2023, while simultaneously increasing their bond holdings via Treasuries, representing the 10th largest inflow over the of the last 12 years.
“We expect contrarian outperformance of bonds, international stocks, gold relative to the consensus on American exceptionalism,” Hartnett wrote in a note.
He recommended a strategy that includes positioning for a U.S. economic boom and a global slowdown in the first quarter, buying international stocks in the second quarter in anticipation of policy changes and easing conditions financial assets abroad, and an investment in gold and raw materials in 2025 to combat potential inflation. surprises.
Finally, the bank suggests long positions on cryptocurrencies and China as a hedge against potential “bubble” risks.
