Clients are Buying Tech and Exiting 'Reflation Trades' - BofA's Flow Show

July 23, 2021 6:45 AM EDT

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This week’s “Flow Show” from BofA points towards a continuation in the recent week’s trends as clients continue to add fixed-income assets and exit reflation trades.

Overall, clients poured $8.4 billion into bonds, $4.8 billion into cash, $3.3 billion to stocks, $1.0 billion from gold, which is higher inflows into the yellow metal than what we witnessed in the prior weeks.

BofA’s data shows that investors have poured about $600 billion in stocks year-to-end. Tech inflows have continued for the 4th straight week while investors are exiting reflation trades for the 5th straight week.

“For every $100 of inflow since Nov'20 outflow from value = $18, small cap $17, financials & materials $10,” BofA’s Chief Investment Strategist Michael Hartnett commented in a note.

Allocations of BofA’s private clients are 64.6% stocks (high), 18.1% bonds (low), and 10.9% cash. Total assets under management are $3.2 trillion.

These are the days to cherish, says Hartnett and further adds:

“Global government bond yield 0.4%, IG bonds 1.6%, EM sovereign bonds 3.5%, HY bonds 4.2%, 10-year UST yield back below dividend yield of S&P500...all despite $31tn of global monetary & fiscal stimulus, US debt per capita surging from $69k to $82k, >3.7bn Covid-19 vaccinations, shortest recession/fastest recovery of all-time, surging inflation…”

The strategist also notes that the last week witnessed the biggest outflow from EU stocks since Mar’21 ($0.7 billion).

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