Cash Dominates Fund Flows

Cash continued to dominate fund flows, with $24.5 billion flowing into money markets over the past week, leading to a 9-month high in the 4-week moving average (MA), Bank of America revealed in a new weekly report.

Equities also saw significant inflows, totaling $13.7 billion, with $19.9 billion going into ETFs, offsetting the $6.2 billion outflow from mutual funds. Bonds remained strong, with inflows persisting for 36 weeks, accumulating $20.7 billion.

Sector Performance

By sector, technology captured $0.7 billion in inflows, while financials and real estate sectors also performed well, securing $1.0 billion and $0.8 billion, respectively.

Notably, financials witnessed their largest inflow in six weeks, while utilities saw a reversal, with the largest outflow in 10 weeks at $0.1 billion.

Macro Insights

On the macro front, BofA’s strategists noted that the combination of the Bank of Japan’s policy shift and resilience in credit markets has “cut ‘hard landing’ fears” for the U.S. economy. However, they voiced caution about U.S. hiring data, highlighting that the last six times when the private sector’s share fell below 40%, a recession followed.

Emerging Markets Activity

Meanwhile, emerging markets saw robust activity in the past week, with $6.9 billion flowing into stocks, marking the longest streak since November 2021, now at 13 consecutive weeks. In contrast, Japanese equities experienced the largest outflow in seven weeks, totaling $1.2 billion, and European equities resumed outflows after two weeks of gains, losing $0.8 billion last week.

Fixed Income Trends

In fixed income, investment-grade bonds saw sustained interest with $9.0 billion in inflows over the past 44 weeks. High-yield bonds also attracted $1.7 billion, marking three consecutive weeks of inflows. Treasury funds experienced their largest inflow since October 2023, with $8.4 billion entering the space.

Commodities Outlook

For commodities, BofA said the bull market is “just starting.”