According to Bank of America, there were significant inflows in cash ($68.4 billion) in the week to Wednesday, marking the largest inflow in nine weeks.
This comes as financial conditions tighten, allowing bond yields and the dollar to rise. In terms of asset allocation, stocks attracted $2.2 billion in inflows, bonds saw $4 billion, while gold experienced an outflow of $700 million.
Bank of America's strategists are anticipating higher oil prices, a stronger dollar, and rising yields, all of which could pose risks to risk assets.
“Consensus probability of hard landing probably around 20%, but higher-for-longer oil/US$/yields, tighter financial conditions remain the Sept/Oct risk for risk assets, plus raises hard landing probability in next 6 months (any rally in risk as FCI eases in autumn on say -ve payrolls, we would sell)."
“Notable outflows included the tech sector with its first outflow in 11 weeks at $1.7 billion, telecoms with the largest outflow since September 2022 at $300 million, and U.S. small caps with the largest outflow in 11 weeks at $1.5 billion."
In terms of regional breakdown, emerging markets saw their first outflow in nine weeks at $500 million, Japan experienced its largest outflow since May at $600 million, Europe recorded its 26th week of outflows at $66 million, and U.S. outflows resumed at $400 million.
Treasury bonds recorded their 30th consecutive week of inflows at $2.6 billion, but emerging market debt saw its sixth consecutive week of outflows at $600 million.