LONDON (Reuters) – Investors’ rush to the safety of cash, a dominant theme in capital flow data this year, may be peaking, Bank of America global research said on Friday.
There was a net $10 billion dollars of outflows from cash in the two weeks to Wednesday, BofA said, referencing EPFR data, describing this as “a tentative top after $642 billion of inflows” since the U.S. Silicon Valley Bank failed in mid March.
That collapse jolted markets, and the rush for cash in the first half of this year was further reinforced by central banks continuing to hike interest rates, which reduced investor demand for stocks and made rates on cash-like money market funds more attractive.
More recently. however, excitement about AI has triggered a boom in tech stocks, while there are signs that inflation is easing on both sides of the Atlantic, most significantly in the United States, meaning the end of rate hikes is likely in sight.
The S&P 500 is trading around its highest in 15 months.
Tech stocks have seen strong inflows for the past eight weeks, BofA said, and high yield bonds saw their third weekly inflow in the week to Wednesday versus outflows from investment grade bonds.
The weekly data, however, showed $7.5 billion of flows into cash, as well $1.4 billion to bonds, $600 million from gold and $2.1 billion from stocks.
Bank loans saw inflows of $400 million, the most since May 2022, and Japanese equities saw their seventh week of inflows, its longest streak since January.
BofA’s own “bull bear indicator” rose to its most bullish level in the year-to-date.
(Reporting by Alun John; Editing by Amanda Cooper and Kim Coghill)
