BofA’s Hartnett says concentrated U.S. stock returns are likely to persist
Investing.com -- Flows into risk assets remained solid in the latest week, with $26.1bn into cash, $12.1bn into bonds, $3.5bn into equities, $2.8bn into gold, and $2.1bn into crypto, Bank of America (BofA) said in a weekly report.
Emerging market debt saw a record $5.8 billion inflow, while U.S. small-cap funds recorded their largest weekly outflow of 2025 at $4.4bn.
"For all the Sturm und Drang, every asset class [was] blessed by inflows,” said BofA strategists led by Michael Hartnett.
Since the start of the year, equities have absorbed $325bn, bonds $269bn, and gold $40bn—marking a record.
U.S. stocks have taken in $164bn and are on track for their third-largest annual inflow, while large caps have attracted $224bn.
Small caps have seen a $35bn outflow, “on course for [a] record annual outflow,” BofA highlighted.
Despite the S&P 500 sitting near record highs, participation remains narrow. Only 22 stocks are currently at all-time highs, compared to 67 in January.
Hartnett noted this move is “on cusp of [the] 7th great breakout since 1990, albeit with [the] smallest ‘breakout stock’ participation.” The rally remains concentrated in tech, with broader market strength still lagging.
He said the market is approaching levels that typically trigger a contrarian caution signal. “Past 4 weeks inflows to global equity/HY bonds [are] precisely 0.99%,” Hartnett noted, adding that such “greedy inflows [are] saying take some profits off the table.”
He also emphasized that “the only time to ignore trading rules is in a bubble or a crash.”
According to BofA, the macro backdrop looks incrementally more supportive into the second half. “The policy setup into H2’25 [is] less threatening,” Hartnett wrote, citing potential Fed cuts and fiscal stimulus in Europe and China.
The strategists also pointed out the risk of further U.S. tariffs but noted the market does not currently expect escalation. Meanwhile, “2025 [is] on track to be [the] biggest year of global rate cuts since 2009,” with 64 cuts already in place.
Hartnett reiterated his core positioning. “We stay overweight ‘BIG’ (Bonds, International, Gold),” stressing that the yellow metal “remains [the] best hedge of coming US$ bear market.”
Fixed income flows were strong in the past week, with high yield adding $3bn, EM debt $5.8bn, and IG bonds $1.3bn.
Regionally, Japan posted a third week of outflows, and Europe was roughly flat.
By sector, tech led outflows at $3bn, while materials, healthcare, and utilities attracted new money.