Investors pumped money into stocks and siphoned funds away from bonds and cash as global markets braced for higher interest rates, the weekly report showed. BofA.
In the first 13 trading days of the year, compared to the same period in 2021, stock funds posted inflows of $52 billion versus a similar amount last year, while credit and bond funds posted small outflows. after strong inflows, according to BofA using EPFR data.
“Rising rates and falling earnings are a bad combination for credit and equities, and the Federal Reserve (Fed) it is hysterically lagging,” analysts led by Michael Hartnett, chief investment strategist at the US investment bank, said in a note.
The US and UK money markets expect up to four interest rate hikes in 2022.
For the week, emerging stock markets saw the biggest weekly inflows since March 2021 at $5.2bn, China posted significant volume and Wall Street equity funds posted their first outflows in four weeks.
Cash levels were also building up, although there is still no risk-off sentiment in equity flows.
BofA’s “private clients” – which manage $3.3 trillion in assets – held 11.3% in cash, while the median beta of the top ten stocks held by their clients was higher than the historical average, indicating that they were more vulnerable to market volatility.
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