Street Calls of the Week
Investing.com -- Global investors rotated out of cash and into risk assets last week, according to Bank of America.
Equity funds absorbed $28.1 billion, marking one of the strongest weekly allocations of the year, while money-market funds saw $24.6 billion in redemptions, the largest since July.
Bonds drew $5.8 billion, gold $4.5 billion, and crypto $600 million, the bank said in its weekly “The Flow Show” report.
Inflows into precious metals has been particularly notable. Gold funds have now taken in $34.2 billion over the past 10 weeks — the biggest such streak on record — with BofA noting that gold remains a “most crowded” trade but still under-owned by large private client accounts, which hold just 0.5% in the asset.
Tech attracted a record $10.4 billion in weekly flows, while energy funds saw $700 million, the largest since June.
China equity funds pulled in $13.4 billion, the biggest since April, helping lift emerging-market stock flows to $13.5 billion.
U.S. stocks marked a fifth consecutive week of inflows at $12.4 billion, while Europe saw another $1 billion in outflows.
Strategists led by Michael Hartnett reiterated their preference for international equities over U.S. markets. “Our conviction in rotation from H1’2020s U.S. exceptionalism to H2’2020s global rebalancing is strong,” the team wrote.
They argue that easing oil prices are a positive tailwind for China, Japan and Europe, pointing to improving PMIs and a projected 9% EPS growth globally over the next year, above current consensus.
While acknowledging that emerging market (EM) optimism is now crowded, Hartnett still sees the rotation holding as bond yields roll over and capital shifts out of U.S.-centric trades.
On gold, Hartnett maintained a long stance, pointing to what he sees as a structurally higher price path driven by central bank accumulation, geopolitical détente potential and speculative flows rotating from crypto.
“Need something bigger (central banks revaluing gold, U.S.-China détente, Russia-Ukraine détente, AI bubble causes real rates spike) to end bull run in gold,” the note states.
Among other flows from last week, investment-grade bond funds saw a 25th straight week of inflows at $8.3 billion.
High-yield bonds had their first outflow in 26 weeks at $3.2 billion, while emerging-market debt also saw its first weekly outflow in 27 weeks at $1.7 billion.
U.S. Treasury funds recorded a second week of inflows at $700 million, and municipal bonds drew $1.5 billion. Bank loan funds returned to outflows at $1 billion.