Strategists at Bank of America have observed a significant movement of funds across various asset classes for the week ending March 13.
The spotlight this week was on U.S. stock funds, which saw an unprecedented influx of $56.1 billion, marking the largest inflow ever recorded for a single week. Cryptocurrencies also impressed with a record-breaking $3.4 billion in inflows, as noted in BofA’s report referencing EPFR Global data.
“US stocks & crypto joined by Japan & corporate bonds buzzing with euphoria on the prospect of “Fed cuts = Goldilocks”,” analysts wrote in a note.
Cash funds were also a major recipient of investments, attracting about $49.7 billion. Global bond funds received a substantial $7.8 billion, reflecting continued investor interest in diverse asset allocations.
Following a week of historical outflows, technology funds rebounded strongly with $6.8 billion in inflows, reversing the previous week's trend.
Analysts pointed out the growing risks of stagflation as inflation accelerates in both developed and emerging markets, coupled with signs of the U.S. labor market showing weaknesses.
They predict that a new phase of stagflation could lead to outperformance in "gold, commodities, crypto, cash," and a major "steepening of the yield curve,” potentially promoting contrarian strategies focused on a mix of resource and defensive stocks.
In the fixed-income market, investment-grade (IG) bond funds continued their positive streak with a 20th consecutive week of inflows, totaling $6.6 billion. High-yield (HY) bonds saw about $800 million in inflows. Conversely, emerging market (EM) debt faced a fifth consecutive week of outflows, shedding $300 million.
Overall, global stock funds experienced a substantial influx of $55.7 billion. However, European funds recorded their 11th consecutive week of outflows, amounting to $1.7 billion.