Investing.com -- Investors pulled $4.1 billion from global equity funds in the week to May 21, ending an eight-week streak of inflows as capital rotated into bonds, cash and crypto, according to Bank of America (BofA).
Bond funds drew $25 billion, money markets added $16.1 billion, and crypto saw $2.3 billion of inflows. Gold, by contrast, lost $2.9 billion—the third-biggest weekly outflow ever.
Tech equities recorded a record $6.8 billion exit, mostly tied to the $6.7 billion liquidation of the leveraged FNGA ETF.
Investment-grade bonds led fixed-income flows with a $13.5 billion weekly gain, the strongest since September. High-yield bonds posted a fourth consecutive weekly inflow, totaling $1.9 billion, and $9.8 billion over four weeks—the most since November.
Emerging market (EM) debt inflows hit $1.7 billion, the best since January 2023, while Treasuries saw $5.1 billion return after recent outflows.
The note’s most arresting stat captures the scale of U.S. government spending. “If you spent $100 every second, it would take you 2248 years to equal the $7.1 trillion the U.S. government spent in the past year,” BofA strategists led by Michael Hartnett highlighted.
The strategists say this fiscal trajectory is unsustainable. Bond yields above 5%, they argue, are damaging to the highly “financialized” U.S. economy and bond vigilantes are now incentivized to punish the government’s failure to rein in debt and deficits.
Hartnett warns that 30-year Treasury yields above 5%—paired with a sub-100 dollar strength index (DXY)—remain negative for risk assets.
The report also points to a structural shift in markets as the “Anything but Bonds” trade takes hold. A 40-year bond bull market has reversed, driven by persistent inflation, tighter monetary policy, expansive fiscal spending, and protectionist industrial strategies—marking a clear break from the disinflationary era that long supported fixed income.
Regionally, U.S. equity funds saw $1.8 billion in outflows in the past week. Emerging markets lost $5.5 billion—their worst week in 14—and Japan posted a $4 billion exit. Europe remained resilient with $400 million in inflows.
Sector-wise, Materials, Financials, and Tech led the outflows.