Investors are Shifting Away From Tech as BofA Flows Show Largest Outflows Since December 2018, Gold Sees Inflows

Investors have continued to adjust their portfolios for higher inflation and are increasingly moving away from tech stocks, BofA's weekly flows show.

As much as $1.1 billion outflows in tech-focused funds were recorded in a week to May 19, which marks the highest level since December 2018. On the contrary, gold funds had $1.3 billion inflows during the same period.

After gaining 44% in 2020, global tech stocks are up only 2% this year. BofA’s Chief Investment Strategist Michael Hartnett notes that “since Jan’20 inflows to financials, energy, materials now exceed inflows to tech same period.”

Elsewhere, BofA’s flows shot the largest inflow ($2.8 billion) to government bonds in 6 months. The bank’s private clients have allocated $3.1 trillion, with 64% going to stocks, 18.3% bonds, and 11.3% in cash.

On the above-mentioned figures, Hartnett comments:

“Bulls can point to 2017/18, strong growth, range-bound yields, dithering Fed, and await the final melt-up; bears can point to 2007/8, as a sinister series of deleveraging “events” ended with a “Minsky Moment”; we prefer 1967-69 analog of interest rates unanchored by large budget deficits attempting to pacify populist & polarized electorates, an excessively easy & complicit Fed, inflation rising to multi-year highs...the value bull of 1968 (= H1’2021) was followed by the volatile bear of 1969,” he says in today’s memo to clients.

“CPI peaks around 41⁄2%, core CPI around 31⁄2% Dec/Jan’22; meantime wage growth (AHE) peaks 4-5%; “peak liquidity” theme intact as Fed now joining BoC, RBA, BoE in summer/autumn tapering; note pace of central bank purchases (Fed, ECB, BoJ, BOE) set to fall from $8.5tn in ‘20 to $3.4tn in ‘21 to $0.4tn in ’22; tech prone to rips whenever inflation/bond yield fears temporarily subside, but we “sell the rip”.”

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