BofA Says Investors Flock to Cash; Treasuries Track Record Flows

(Bloomberg) — Investors piled into cash and bonds while pulling 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 of inflows, while investors poured $6.9 billion into bonds in the week through August 9, strategists led by Michael Hartnett wrote in a note, citing data from EPFR Global. In the meantime, US stocks had their first outflow in three weeks at $1.6 billion.

Hartnett said cash inflows have reached $145 billion quarter-to-date while flows into Treasuries reached $127 billion this year, on course for an annualized record of $206 billion.

Investors have been flocking to money-market funds ever since the Federal Reserve began one of the most aggressive tightening cycles in decades. Meanwhile, US bond markets have seen sharp swings this year as investors fretted over higher-for-longer interest rates and the possibility of a recession. On the flip side, equity markets have been strong amid resilient corporate earnings, though the S&P 500 rally has stalled over the past two weeks.

Hartnett said the cost of capital, which has risen this year, will not fall without a hard recession, which in turn may hit stocks. The strategist was rightfully bearish last year but his negative outlook on stocks in 2023 is yet to materialize.

–With assistance from Michael Msika and Sagarika Jaisinghani.

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