By Saikat Chatterjee
LONDON, Sept 3 (Reuters) – Traders have swept into belongings perceived to carry out on slowing progress and rising inflation, a weekly round-up by BofA confirmed on Friday, with tech shares seeing their largest inflows in six months and huge outflows from U.S. authorities debt.
At $2.5 billion, tech shares noticed the most important inflows since March 2021, whereas outflows from U.S. Treasuries rose to $1.3 billion for the week – their highest since February 2021 – as “stagflation” trades gathered momentum.
Rising market equities loved inflows of $4.4 billion, the info from BofA additionally confirmed. Personal shoppers of the U.S. funding financial institution, holding $3.2 trillion in belongings, elevated their allocation to shares to a contemporary document excessive of 65.2% however lower bonds to an all-time low of 17.7%.
Stagflation is characterised by weak progress and persistently excessive inflation. It’s normally seen as a very vicious interval within the financial cycle, when only a few asset courses carry out properly.
The funding financial institution’s bull and bear indicator held properly beneath a February excessive as decrease bond yields and fewer exuberant world fairness inflows weighed on sentiment.
“Our view is lengthy high quality (main shares) as that’s the greatest market and macro hedge in backdrop of stagflation and waning fiscal and financial coverage stimulus,” analysts led by Michael Hartnett, chief funding strategist on the financial institution stated in a notice.
Whereas world markets have recorded a string of highs over the summer time interval, market sentiment has change into more and more cautious as a result of rising inflation. Tuesday’s information confirmed euro zone inflation elevated to three% year-on-year in August, the very best in a decade.
In notable milestones, BofA stated the U.S. inventory market recorded a string of 53 closing highs in 2021, the fifth most previously 100 years. The earlier 4 episodes had been adopted by heavy market declines. (Reporting by Saikat Chatterjee; Modifying by Marc Jones)