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Investing.com -- All major asset classes drew inflows in the week to Sept. 3, led by cash with $51.8 billion, bonds at $22.2 billion and stocks at $17.6 billion, Bank of America revealed in a Friday report.
Gold attracted $6.5 billion, the largest weekly inflow since April, while crypto saw $500 million, according to EPFR Global data cited by the bank.
The biggest trends included $200 billion flowing into cash over five weeks, the largest since January, and bonds seeing uninterrupted inflows since April, with $358 billion allocated, 77% into investment grade, high yield and emerging market debt.
Emerging market equities attracted $3.2 billion, their biggest inflow in 11 weeks, technology funds took in $4.3 billion, the most since April, and financials posted their strongest two-week run since early 2022 at $5.2 billion.
Strategists led by Michael Hartnett said the backdrop for equities hinges on payrolls and yields.
“Most bullish outcome for risk assets = strong >150k Aug payroll and Treasury yields fall (the full Goldilocks),” they wrote, contrasting it with the “most bearish” case of negative payrolls alongside rising yields due to debt default concerns.
Hartnett recommended staying long gold into yield curve control, arguing that lower yields would broaden the stock market rally into long-duration sectors such as biotech, real estate investment trusts (REITs) and small caps.
The team said the next significant move in bond yields is likely lower, supported by policy interventions, Fed rate-cut credibility and weakening U.S. data including falling construction spending, declining home prices and softening labor market trends.
Hartnett also drew parallels with the early 1970s, when political pressure on the Fed and dollar debasement created a pre-election boom that pushed equities higher before a second wave of inflation.
He said the parallel suggests today’s policy backdrop could similarly support risk assets in the near term, but warned that inflation risks in 2025–26 may force tighter measures, with sector positioning favoring those that “outpace China” and avoiding those that “whip inflation.”
Regionally, U.S. equities drew $5.1 billion for a second straight week of inflows, Europe saw $700 million after prior outflows, and Japan attracted $1 billion.
Emerging markets recorded a third consecutive week of inflows at $3.2 billion.
In fixed income, investment-grade bonds logged a 19th week of inflows at $13.9 billion, high yield added $200 million, Treasuries $3.1 billion, and emerging market debt $1.9 billion.