Upcoming labor market data is likely to “resolve fall uncertainty,” according to Bank of America ‘s strategic investors.
“Payrolls (+/- 100k) will resolve autumn uncertainty… until then risk is pivoting rather than tearing or retreating,” they said.
US equity mutual funds posted the biggest withdrawals since April, as $6.1 billion left the asset class. At the same time, there was a notable shift to cash, with money market funds recording inflows of $30.2 billion.
The figures, from a Bank of America note and based on data from EPFR Global, also highlighted that bond funds received $16.7 billion and gold saw inflows of $500 million for the week ended 11 September.
Investors diversified their portfolios, with $1.6 billion leaving equity mutual funds and cryptocurrencies seeing $200 million in outflows. Money market mutual funds have now accumulated assets totaling 6.3 trillion. dollars, reaching a record level.
Japanese stocks faced their biggest outflow since July, amounting to $1.4 billion. US growth stocks were not far behind, with their biggest outflows since June at $5.6 billion, while similar trends were seen in technology funds and financials, which saw their biggest outflows since November 2023 at $200 million and $1.6 billion, respectively.
The bank’s strategists said that XAU/USD, currently at all-time highs, is seen as the best hedge against a possible re-acceleration of inflation in 2025. Therefore, they advised their clients to buy any dips in gold.
They also suggest that commodities, such as oil and industrial metals, could be a contrarian play as they are the only asset class priced in for a hard landing, unlike the SOFR market which is discounting 240 basis points on cuts in Federal Reserve over the next 12 months.
The recommendation for investors is to sell stocks at the first rate cut due to downside risks to payroll and earnings per share forecasts. Conversely, there is a bullish outlook for bonds, with yields expected to head towards 3% as the market discounts the risks of a hard landing.
Gold also has a bullish outlook, with forecasts to hit $3,000 an ounce amid rising US debt and deficits. Strategists advocate a bullish approach, favoring bond-sensitive properties and resources in the equity range.
In terms of regional activity, Europe saw its third straight week of outflows, totaling $1bn, while emerging market (EM) stocks enjoyed their 15th week of inflows, taking in $2.2bn.
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Written by D Fernando
