BofA: Record Funds Flow Into Equities, Led by Financials

March 19, 2021 7:57 AM EDT

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A record $68.3 billion flew into equities in the week ending March 17, according to BofA strategist Michael Hartnett. A record week has now pushed the total YTD inflows to $347 billion YTD.

The past 4 weeks also witnessed a record inflow to financial stocks - $11.2 billion. The consumer sector also attracted the second-largest inflow ever to $2.2 billion. Despite a falling Nasdaq index amid higher Treasury yields, the last week’s inflows of $3.2 billion were the six largest ever for tech stocks.

In a research note sent to clients on Friday, Hartnett presented 3 views on the current market environment:

  1. Short-term...cyclicals have soared in anticipation of boom & “Goldilocks” plays e.g. tech, credit & EM on back foot; immediate risk is disorderly yield jump hurts cyclicals...oil price plunge first sign of potential regime shift to higher yields-lower growth... utilities & staples good defensive hedges.
  2. Medium-term...asset returns will be low/volatile in ’21 driven by 3P’s of peak Positioning, Profits, Policy in H1, and 3R’s of rising Rates, Regulation, Redistribution in H2; own volatility.
  3. Longer-term...2020 marked the secular low point for inflation and interest rates (Trading the Inflation Theme); 40-year bull market in bonds over; long-term asset allocation implications bullish real assets, commodities, volatility, small cap, value & EAFE/EM stocks, bearish bonds, US dollar, large cap growth.

BofA’s Bull & Bear Indicator rose to 7.3 this week from 7.2 while 8.0 represents a “sell” signal.

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