According to Bank of America, U.S. large cap stocks suffered their largest weekly outflow since December 2022 in the week ending Wednesday, April 10.
Traders expressed nervousness over persistent inflationary pressures, which could delay rate cuts, coupled with geopolitical tensions adding to market caution.
During the week, U.S. large caps witnessed outflows totaling $15.8 billion, contributing to the overall outflow from stocks amounting to $19.6 billion. Bank of America's weekly report, based on EPFR data, highlighted the concerns among investors amid recent market events.
The market reaction to the inflation figures led to a reassessment of Federal Reserve rate cut expectations, with markets pushing back the anticipated timeline from June to September, albeit with volatility in pricing.
Japanese stocks experienced their first weekly outflow in over three months. Despite these outflows, major equity markets in the United States, Japan, and Europe continue to trade at or near record highs.
Bank of America's report highlighted a prevailing sentiment favoring assets other than bonds, driving demand for inflation hedges like gold, which is also nearing record highs.
“Rare for tech & commodities both top-of-the-price, but consistent with no landing and very 1999,” Bank of America’s strategists wrote in a note.
The strategists also noted that the current environment favors inflation and higher cost of capital until a recession prompts a shift in investor sentiment towards bonds.