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Bloomberg
If investors keep pouring money into equity funds at their current pace, it could add a “breathtaking†$1.6 trillion to stocks this year, Bank of America Corp. (BofA) strategists say.
Despite the market volatility spurred by rising bond yields and inflation bets, equity funds attracted a record $68.3 billion in the week through March 17, according to a BofA note. On an annualised basis, additions will amount to the whopping trillion-dollar figure, smashing the previous record of $300 billion reached in 2017, strategists led by Michael Hartnett forecast.
The flows indicate that equities remain the most popular investment instrument, notwithstanding the slump in frothier sectors such as technology. Bonds have seen inflows of $110 billion this year, only a third of the $347 billion into stock funds, as equity returns remain alluring with borrowing costs still near historic lows.
Investors have so far favoured US stocks among major markets in 2021, adding about $138 billion, compared with just $264 million for Europe, according to BofA and EPFR Global data. In the past week, US funds saw a record inflow of $53 billion.
Looking at sectors, flows into technology shares continued despite inflation woes, with the sector attracting $3.2 billion in the past week, the sixth-largest ever, BofA said.
Financial equities, which are a classic value play, were right behind tech with $2.6 billion inflows. Investors have been rotating into the cheaper and cyclical sectors on bets that the Covid-19 vaccinations will fuel an economic rebound.