Cash Dominates Inflows Last Week Across Major Asset Classes, Bank of America Reports
Last week, cash continued to dominate inflows across major asset classes, with significant allocations seen in money market funds, equity funds, and bond funds. According to Bank of America's latest report, cash inflows over the past three weeks totaled $145.3 billion, marking the largest inflow since January.
During the week ending Aug. 21, money market funds drew $37 billion in inflows, while equity funds attracted $20.4 billion and bond funds saw $15.1 billion. Gold also experienced its largest inflow in four weeks at $1.1 billion, while cryptocurrencies captured $200 million.
U.S. equities saw their biggest inflow in five weeks, totaling $12.6 billion, and emerging market equities continued their 12th consecutive week of inflows, the longest streak since February, with $4.7 billion.
Despite recording positive flows for eight consecutive weeks, the technology sector saw the smallest inflow during this period at $0.5 billion.
BofA's private clients, who hold $3.7 trillion in assets under management, currently allocate 62.1% to stocks, 20.0% to bonds, and 11.1% to cash, following the largest weekly move into cash over the past three months.
Strategists led by Michael Hartnett noted that rate cuts are not likely to spark equity buying from the $6.2 trillion in money market assets and $2.5 trillion in private equity cash. They emphasized that historically, the first Federal Reserve rate cut has preceded more cash inflows in a "soft" landing scenario, while bonds tend to perform well in a hard landing.
BofA also pointed out that historically, after 5 out of 6 Powell Jackson Hole speeches, the market dropped by an average of 7.5% in the next three months.
Looking ahead, the bank highlighted inflation as a growing risk for 2025, driven by factors such as geopolitics, strikes, protectionism, and the impact of AI and renewables on higher CPI.
Regionally, Japan experienced outflows of $500 million, while Europe recorded its second consecutive week of inflows at $400 million.
In terms of style, U.S. large-cap stocks received $10.2 billion in inflows, U.S. small caps garnered $2.1 billion, and value stocks experienced a $1.6 billion outflow.
In fixed income, investment-grade bonds marked their 43rd week of inflows at $8.1 billion, high-yield bonds had their second consecutive week of inflows at $2.4 billion, bank loans saw their fourth consecutive week of outflows at $500 million, Treasuries recorded their 16th week of inflows at $4.7 billion, and emerging market debt had its fourth week of outflows at $300 million.
In summary, the data indicates a strong trend towards cash allocations and inflows across various asset classes. Investors should consider the implications of these movements on their portfolios and be prepared for potential shifts in the market based on historical patterns and emerging risks.