Buyers Fleeing to Money Like It’s 2020, BofA Strategists Say

(Bloomberg) — Buyers poured probably the most cash into money since April 2020 on fears of a looming recession, however shares might see additional declines as they don’t absolutely mirror that threat, say Financial institution of America Corp. strategists.

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At the same time as main benchmarks bounced off final month’s lows, the financial institution’s report citing EPFR World knowledge confirmed money funds acquired practically $89 billion within the week by means of Oct. 5, whereas buyers withdrew $3.3 billion from world inventory funds.

Equities are rebounding this month after slumping within the earlier three quarters, fueled by optimism that weaker-than-expected knowledge will immediate the Federal Reserve to melt its outlook on price hikes. The S&P 500 is on monitor for its greatest week since end-June, with payrolls knowledge later Friday seen as pivotal to find out the course of coverage.

Wall Road is “rebelling towards” coverage tightening, Financial institution of America strategists led by Michael Hartnett wrote within the observe. And though the rally might preserve going within the brief time period, helped by technical ranges, markets are more likely to see new lows in October because the specter of recession pressures company earnings, they are saying.

It’s “so tempting to be contrarian bull” given the rout in bond markets and cheaper US inventory valuations, Hartnett wrote, however warned that his base case requires a “arduous touchdown” within the financial system.

A few of his counterparts share the view that inventory markets haven’t but hit a backside. Credit score Suisse Group AG strategists stated this week that earnings confronted an “excessive” threat and that inventory funds had but to see “vital” outflows — all implying additional declines within the S&P 500. Citigroup Inc. strategists led by Hong Li, in the meantime, stated US equities had solely simply began pricing in an financial contraction.

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Financial institution of America’s report additionally confirmed that greater than $18 billion left bond funds. In Europe, fairness outflows continued for a thirty fourth straight week, within the longest streak since 2016. By buying and selling type, US worth and huge caps had inflows, whereas progress, mid caps and small caps all noticed redemptions. Amongst sectors, actual property had additions of about $100 million, whereas $2.4 billion left supplies.

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