Largest Inflow to Gold in 3 Months, $18.3 Billion Went into Stocks but 'Bad News is Global Tapering Has Begun' - BofA

May 7, 2021 8:29 AM EDT

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Investors $1.6 billion buying gold in a week to Wednesday, BofA Securities' weekly fund flow shows. This marks the largest inflow into the yellow metal in 3 months.

Elsewhere, investors poured $18.3 billion in stocks, most cyclical stocks while growth stocks recorded outflows of $26 billion. Bonds attracted $13.5 billion.

“Good news is Fed determined to stoke Wall St exuberance & Main St inequality (Fed has been tech’s best friend for past 10 years) & ignore future systemic risk consequences; bad news is global tapering has begun (big 4 QE set to fall from $8.5tn in ‘20 to $3.4tn in ‘21 to $0.4tn in ’22) and in Q2/Q3 the stronger the macro the quicker & bigger the taper,” BofA’s top strategist Michael Hartnett said in a note.

Yesterday, the Bank of England (BoE) started tapering to follow the footsteps of the Bank of Canada (BoC).

“The stronger the macro, the quicker and bigger the taper,” BofA says.

On other fronts, Hartnett outlines:

  • Cyclical oil outperformance against gold is the largest in over 60 years;
  • BofA Global EPS model says peak global EPS growth ≈ 36% in April;
  • SOX index fails to hit new high, i.e. >3300 and markets via peak OMX, DAX, Nikkei, KOSPI in coming months as global reopening = peak EPS revisions.

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