stocks and bonds accounted for the majority of flows last week, with European equity funds seeing their largest inflow since February 2023, Bank of America said in a Friday note.
Stock funds attracted $11.9 billion, bonds $11.7 billion, while $3.7 billion flowed out of money market funds, according to EPFR Global data cited by BofA.
Europe recorded its third consecutive week of inflows, the largest since February 2023, with $1.1 billion.
technology funds saw outflows over the past two weeks, totaling $900 million, marking the first consecutive outflow since April 2023. Meanwhile, utilities saw their largest inflow since November 2022, with 700 million dollars.
Bank of America strategists suggest that the Everything But Bonds trade should reverse in the second half of the year, with the 30-year US Treasury acting as the best hedge for weaker nominal growth.
They note that credit and stocks are reacting bullishly to the increasing odds of a “soft landing,” but believe the odds of a “hard landing” are too low, “given the stagnation in real retail sales, the stagnation of the rebound in global PMI and (and) the shift of the labor market from “unequivocally strong” to “ambiguously 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 inconsistent with the start of a new bull run.
In terms of macroeconomic developments, BofA predicts that the US CPI will be between 3.75% and 4.5% in the presidential elections in November, while “the Federal Reserve wants to cut at the first opportunity.” Inflation in 2024 prevented the Federal Reserve from reducing rates, thus extending tight monetary policy, strategists noted.
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Regionally, the United States experienced its fourth week of capital inflows worth $12.1 billion, while emerging market (EM) stocks saw its second week of capital outflows worth $2.5 billion, and Japan saw a resumption of capital outflows worth $900 million.
In fixed income, investment grade (IG) bonds had their lowest inflow in 21 weeks with $3.3 billion, high yield bonds (HY) recorded their second week of inflows with $1.9 billion, Treasury bonds had their second week at $4.9 billion, Treasuries had their second week at $4.9 billion and debt inflows resumed at $400 million, and bank loans had their fourth week of inflows at $800 million. Dollars.
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