(Bloomberg) — Investors have piled into cash and bonds as they pull money out of the US stock market in recent days, according to Bank of America Corp. strategists.
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Cash funds attracted $20.5 billion in inflows, while investors pumped $6.9 billion into bonds in the week ending Aug. 9, strategists led by Michael Hartnett wrote in a note, citing data from EPFR Global. Meanwhile, US stocks posted their first outflow in three weeks at $1.6 billion.
Hartnett said cash inflows reached $145 billion on a quarterly basis while inflows on Treasury bonds hit $127 billion this year, on track to hit an annual record of $206 billion.
Investors have been flocking to money market funds since the Federal Reserve began one of its most aggressive tightening cycles in decades. Meanwhile, US bond markets have seen wild swings this year as investors worry about higher interest rates for longer and the possibility of a recession. On the flip side, stock markets have been strong amid resilient corporate earnings, although the S&P 500’s rally over the past two weeks has stalled.
Hartnett said the cost of capital, which has risen this year, will not come down without a severe recession, which could in turn affect stocks. The strategist was truly bearish last year, but his negative outlook for stocks in 2023 has yet to materialize.
— with assistance from Michael Msika and Sagarika Jaisinghani.
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