Money market funds continue to experience robust inflows for the second consecutive week, marking the strongest start to the year on record, according to Bank of America (BofA).
In the week ending January 10, cash saw a substantial $39.7 billion inflow, while bonds received $13.9 billion. Conversely, stocks witnessed an outflow of $7.1 billion, and gold shed $1.2 billion, as reported by EPFR Global data cited in a note from BofA.
Strategists highlight a historical rarity, noting that in the last 90 years, the Federal Reserve has only cut rates when core CPI exceeded the unemployment rate on five occasions. Typically, rate cuts are triggered by war or recession.
“Why Wall St soooo risk-on…at least until weak US$ (DXY <100) says "policy mistake" or US labor market transitions to redundancies (-ve payroll),” analysts said in a note.
In noteworthy fund flows, bonds experienced their largest inflow since April 23, with Treasuries seeing the largest outflow in three weeks at $1.1 billion. Investors have been selling USTs in six of the past ten weeks, resulting in a cumulative outflow of $6.1 billion.
On the other hand, technology funds saw their largest inflow in the past 19 weeks at $2.3 billion, while materials funds had their first inflow in the past eight weeks, the largest since February 23, at $1.1 billion.
Analyzing regional equity breakdowns, US equities experienced their first outflow in three weeks, totaling $8.8 billion. Emerging markets saw their sixth consecutive week of inflows at $2.3 billion.
Japan had its first outflow in three weeks at $400 million, and Europe recorded its second consecutive week of outflows at $900 million.