Jobs key to resolve fall stock market drama, says Bank of America by Investing.com

Upcoming labor market data will “resolve fall ambiguity,” according to Bank of America investment strategists.

“Payrolls (+/- 100k) to resolve the ambiguity in the fall… until then risk is rotating rather than breaking or retreating,” they said.

US equity funds posted the biggest withdrawals since April, when $6.1 billion left the asset class. At the same time, there was a notable shift to cash, with money market funds seeing inflows of $30.2 billion.

The data, from a Bank of America note and based on figures from EPFR Global, also shows that bond funds received $16.7 billion and gold saw an inflow of $500 million. dollars for the week ending September 11.

Investors diversified their portfolios, with $1.6 billion in outflows from equity and cryptocurrency funds seeing $200 million in outflows. Money market funds have now accumulated a total of $6.3 trillion in assets, reaching a record high.

Japanese stocks faced their biggest outflow since July, amounting to $1.4 billion. US growth stocks weren’t far behind, with June’s biggest outflow at $5.6 billion, and similar trends were seen in technology and financial funds, which saw their biggest outflows since November 2023 to $200 million and $1.6 billion, respectively.

The bank’s strategists indicated that , currently at all-time highs, is considered the best hedge against a potential re-acceleration in inflation in 2025. They therefore advised their clients to buy any dip in gold.

They also suggest that commodities like oil and industrial metals could be a contrarian play, being the only asset class priced for a hard landing, unlike the SOFR market, which is 240 basis points off Federal Reserve cuts in the next 12 months.

The recommendation for investors is to sell shares at the first rate cut due to downside risks to payroll and earnings per share forecasts. Instead, there is a bullish outlook for bonds, with yields expected to head towards 3% as the market underprices the risks of a hard landing.

Gold also has a bullish outlook, with forecasts to reach $3,000 an ounce amid rising US debt and deficits. Strategists advocate a barbell approach, favoring bond-sensitive real estate and stock-wide resources.

In terms of regional activity, Europe posted its third consecutive week of outflows, totaling $1 billion, while emerging market (EM) stocks enjoyed a 15th week of inflows, receiving 2.2 billions of dollars.