The U.S. economy doesn’t need two Fed rate cuts by year-end: BofA’s Hartnett

Investing.com -- Bank of America said investors poured money across asset classes last week, with inflows into bonds, stocks, cash, and gold all accelerating.

According to EPFR data, bonds attracted $24.7 billion, cash $21.3 billion, equities $19.6 billion, gold $5.6 billion, and crypto $0.6 billion in the week through Sept. 24.

European equities saw their strongest week since June with $2.1 billion in inflows, while global stocks absorbed $88 billion over the past two weeks, the third-largest such inflow on record.

Global equity exchange-traded funds (ETFs) drew $122 billion in the last two weeks, the second-biggest inflow ever.

Gold funds have taken in $17.6 billion in the past four weeks, a record pace.

Despite the liquidity wave and the surge in asset prices, Michael Hartnett, chief investment strategist at BofA, cautioned that recent macro signals point to a resilient U.S. economy.

Mortgage refinancing and new home sales are at three-year highs, and financial conditions have stopped easing as the dollar, yields, and oil prices move higher.

Hartnett argued that “strong U.S. data says macro don’t need 2 Fed cuts by year-end,” adding that expectations for additional easing are at odds with the current backdrop.

He said that while gains in gold, crypto, and equities have been fueled by the global rate-cut cycle, a correction in these assets could be healthy so long as markets avoid a disorderly unwind of consensus trades.

BofA also reiterated its bullish stance on precious metals. Hartnett said the rally in silver, up 56% this year, reflects the inflationary backdrop of the 2020s marked by government intervention, high indebtedness, and geopolitical conflict.

While gold looks “tactically overbought,” he argued it remains “structurally under-owned,” accounting for just 0.4% of private client assets and 2.4% of institutional portfolios.

“We stay long,” Hartnett said.