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Investors show ‘no inflation fear’ as they snap up bonds, equities and sell cash – BofA

Investors showed “no inflation fear” in the run-up to this month’s key central bank meetings, ploughing money into bonds and stocks in the week to Wednesday, a report from BofA Global Research showed on Friday.

Equity funds got a $16 billion injection while bonds saw inflows of $7.8 billion, BofA said citing EPFR data, as investors showed conviction in both asset classes.

In another sign of investors’ confidence that global inflation may have peaked, cash funds saw $300 million in outflows, while gold funds logged outflows of $1.3 billion.

The figures reflect flows prior to a series of key central bank decisions this week from the likes of the U.S. Federal Reserve, the European Central Bank and the Bank of England.

Investors bought $7.3 billion of investment grade bonds and shed $1.6 billion of Treasury Inflation-Protected Securities – the 23rd week of outflows from the inflation-sensitive bonds.

There is growing belief among traders that inflation in the world’s largest economy has peaked, reflected in recent comments from U.S. Federal Reserve Chair Jerome Powell who referred to “most welcome” disinflation.

Within equity flows, there was evidence of return to U.S. stocks which saw a $6.7 billion inflow. But tech stocks were “not yet seeing love via flows”, said BofA. Tech names wrapped up their tenth consecutive week of outflows, although it was the smallest outflow in the last ten weeks.

Emerging market debt and equity enjoyed their seventh straight week of inflows, totalling $8.3 billion.

BofA’s bull and bear indicator – a measure of market sentiment – is at its highest level since March 2022. It has clocked up its biggest three-month surge since August 2020, driven by strong emerging market flows and strong stock market breadth, BofA said.
Source: Reuters (Reporting by Lucy Raitano, editing by Amanda Cooper and Chizu Nomiyama)

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