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Investing.com -- Investors continued rotating out of stocks and into bonds last week, with $19.3 billion flowing into fixed income funds and $9.5 billion pulled from equities—the largest stock outflow of 2025 so far.
Gold attracted $1.8 billion, with year-to-date inflows annualizing at a record $75 billion, while crypto recorded its strongest inflow since January at $2.6 billion.
Passive equity strategies were also hit, with ETFs seeing their biggest weekly outflow since December 2024.
BofA’s Michael Hartnett reiterated his preference for the “BIG” allocation—Bonds, International, and Gold—as the core strategy for 2025.
He remains constructive on U.S. Treasuries following the recent peak in tariffs and believes international equities are “likely to outperform U.S. in ’25” due to better valuations and emerging fiscal support in Europe and China.
Gold, meanwhile, “remains [the] best hedge for U.S. dollar bear market,” Hartnett added.
In the report, Hartnett also highlighted growing signs of stress beneath the surface of equity markets. Defensive sectors like Utilities, Staples, and Healthcare are now just 18% of the S&P 500—down to their lowest share since 2000.
At the same time, investors are hedging exposure to frothy valuations in the U.S. and China by pairing long positions in mega-cap U.S. tech stocks with value names abroad.
Hartnett argues that “a barbell of the Magnificent 7 and rest-of-world (RoW) value” is an appropriate way to navigate extremes on both sides.
Despite the rebound in equity index breadth and fund inflows into high yield and EM debt, Hartnett sees more compelling relative value in long-duration government bonds.
“After “peak tariffs” May rally, we see 5% 30-year UST yields more attractive than SPX at 6k,” Hartnett noted.
Regionally, Japan recorded its largest ever weekly equity outflow at $11.8 billion in the past week, while emerging market (EM) stocks saw their biggest inflow of the year at $2 billion.
Europe extended its streak to a seventh consecutive week of equity inflows.
In fixed income, investment grade and government bond funds each posted their fifth straight week of inflows, and EM debt funds attracted $2.8 billion—marking their strongest weekly showing since January 2023.