BofA says cash racing to stocks, bonds as inflation fears ease

Bloomberg

Bank of America Corp (BofA) says investors are rushing back into stocks and bonds, with signs that inflation has peaked spurring bets the Federal Reserve will dial back
its interest-rate hikes soon enough to keep US economy out of a recession.
Global equity funds pulled in $7.1 billion in the week through August 10, strategists led by Michael Hartnett wrote in a note, citing EPFR Global data. US stocks saw inflows of $11 billion, biggest in eight weeks. Rate-sensitive growth funds posted largest influx since December, while financial stocks drew cash for a second straight week, marking a reversal after 18 weeks of outflows, the data show. Global bonds saw inflows of $11.7 billion, while $4.3
billion was pulled out of cash.
A rally in US stocks gathered pace this week after US inflation data showed a slight cooling in the consumer prices, increasing speculation that Fed will slow the pace of what has been its most aggressive monetary policy tightening in decades. The S&P 500 Index is on course for its fourth straight weekly gain, its longest such winning streak since November.
Still, BofA’s own bull-and-bear indicator remains at “maximum bearish” for a ninth week in a row, the strategists wrote, though that’s often seen as a contrarian signal to buy.
Strategists have cautioned that it could still take time for consumer prices to fall back toward the Fed’s target and central bank officials stressed their fight against inflation would not be brief, suggesting the pressure on stock markets will remain. Citigroup strategists said the rally was also
at risk from highly optimistic
analyst recommendations.
The note from BofA showed outflows from European equity funds continued for a 26th week at $4.8 billion. Although the benchmark Stoxx Europe 600 Index bounced back since a low in June, bank’s European strategists said rally is likely to fizzle out in the absence of a pickup in economic growth.
In terms of equity flows by style factors, US large cap, small cap and value saw additions. Among sectors, consumer and technology saw the biggest inflows, while materials had the largest outflows.