Investing.com -- Money market funds drew their biggest weekly inflow since April 2020, offsetting the previous week’s outflow, but Bank of America says that cash isn’t going anywhere until the Federal Reserve starts cutting rates.

Strategists led by Michael Hartnett said cash stays on the sidelines until there is big monetary easing or sustained Fed cuts. "No rate cuts, no cash cuts," they wrote.

The strategists noted that money market assets have climbed to $8 trillion from $5 trillion in 2023. The funds are now throwing off $330 billion in annual interest income, with the Treasury bill yield at 4.2%.

Touching on market breadth, net 50% of global equity indexes are trading below both their 50-day and 200-day moving averages, the most since April 2025, BofA noted. A contrarian buy signal for risk assets triggers at net 88%, which the strategists said won’t happen soon unless the tech-heavy U.S., Taiwan and Korea indexes reverse quickly.

The BofA Bull & Bear Indicator fell to 8.1 from 8.8 on weaker breadth and wider spreads in high-yield bonds and subordinated bank debt. It remains in "sell" territory.

The strategists said the midterms remain the most likely catalyst for a 10% move in stocks, in either direction, into 2027. They lean risk-off heading into the vote given the central bank tightening cycle, with 54 hikes so far in 2026, and tighter financial conditions.

They also flagged credit "canaries" to watch, including the Australian dollar-yen exchange rate, risk parity funds and tech credit default swaps. Strategists flagged, however, that investors have recently added hedges against a sharp market drop.

In tech, the strategists wouldn’t add exposure with investors already maxed out long. They expect Magnificent Seven stocks to keep outperforming semiconductors as growth beats cyclicals into the midterms, and they see contrarian China tech as "interesting."

The strategists are nibbling at "peak yield" plays, including 30-yearTreasuries, small caps, REITs and Hong Kong property, since most investors are waiting for 6% yields to buy Treasuries. Their big-picture view is to stay long gold, commodities and emerging markets.

In the latest flows, money market funds drew $166.4 billion in the week to Oct. 7, bonds $33.8 billion, equities $12.4 billion and gold $2 billion. Crypto funds saw $600 million in outflows.

Tech funds took in $3.5 billion, the biggest inflow in six weeks, while financials lost $3 billion, the biggest outflow since March.

Regionally, U.S. equities saw their first inflow in three weeks at $3.3 billion. EM equities drew $2.1 billion in a second week of inflows, and Europe added $200 million, also a second week. Japan saw outflows of $3.3 billion, the biggest since May.

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