Interest rate cuts ‘not a likely spark for buying stocks,’ says BofA By Investing.com

Cash continued to dominate flows last week, posting significant allocations across all major asset classes, Bank of America revealed in today’s report. Cash inflows over the past three weeks totaled $145.3 billion, the highest since January.

In the week ended August 21, money market funds attracted inflows of $37 billion, equity funds attracted $20.4 billion, while bond funds saw $15.1 billion.

At the same time, gold saw its biggest inflow in four weeks at $1.1 billion, and cryptocurrencies captured $200 million.

U.S. stocks saw their biggest inflows in five weeks, totaling $12.6 billion, while emerging market stocks posted their 12th straight week of inflows, the longest streak since February, with $4.7 billion .

The technology sector, despite its eighth consecutive week of positive inflows, saw the lowest inflow during the period at $0.5 billion.

BofA said its private clients, which have $3.7 trillion in assets under management, currently allocate 62.1% to stocks, 20.0% to bonds and 11.1% to cash, following the biggest weekly move in cash from the last three months.

Strategists led by Michael Hartnett said interest rate cuts were “not a likely spark to buy shares” in the $6.2 trillion in money market assets and $2.5 trillion in private equity cash. They point out that historically, the Federal Reserve’s first rate cut has preceded “more cash inflows in a ‘soft landing’ scenario,” while bonds typically emerge as winners in a landing forces.

BofA also points out that “5 of 6 Powell Jackson Hole talks are down 7.5% on average over the next 3 months.”

Looking ahead, the bank sees inflation as a rising risk to 2025, driven by factors such as geopolitics, strikes, protectionism and the influence of AI and renewables on higher CPI.

Regionally, Japan saw a resumption of outflows last week, losing $500 million, while Europe posted a second consecutive week of inflows at $400 million.

By style, US large caps received inflows of $10.2 billion and US small caps collected $2.1 billion, while value stocks saw outflows of $1.6 billion. dollars.

In fixed income, investment grade bonds marked their 43rd week of inflows at $8.1 billion, high yield bonds had their second straight week of inflows at $2.4 billion of dollars, bank loans saw their fourth straight week of outflows at $500 million, Treasuries saw their 16th. week of inflows at $4.7 billion, and emerging market debt had its fourth week of outflows at $300 million.