LONDON (Reuters) - The Federal Reserve would likely step-in to support financial markets if the outcome of the U.S. presidential election was contested, a move which would benefit stocks in the tech sector, BofA analysts wrote in their weekly fund flow report on Friday.
"Likely aggressive Fed liquidity injections on contested election would favour tech", the report, which also sees an increased likelihood in a Democratic sweep, read.
U.S. President Donald Trump declined earlier in September to commit to a peaceful transfer of power if he loses the Nov. 3 election to Democratic rival Joe Biden and said he expected the election battle to end up before the Supreme Court.
The president, who trails Biden in national opinion polls, has repeatedly cast doubt on the legitimacy of the election, asserting without evidence that mail-in voting would lead to fraud and a "rigged" outcome.
Citing data for the week to Sept. 30 from financial flow tracking firm EPFR, BofA also said that strong inflows into tech stocks had resumed after a correction occurred on the Nasdaq early September.
Sentiment on equity markets has recently improved with the bank's Bull & Bear indicator rising "towards bullish territory".
Among other big trends in equity markets, the BofA report notes the largest inflow in Japan in 9 weeks, the largest in 4 weeks in emerging markets and the largest outflows from Europe in 13 weeks.
In other asset classes, $2.1 billion went into bonds, $0.3 billion into gold and $19.5 billion was sucked out of cash.
(This story corrects $0.3 billion into gold, not bonds in last paragraph)