These are the top “painful changes” for Q4, according to BofA By Investing.com

Investing.com — Most asset classes attracted inflows over the past week, with the exception of U.S. and European stocks, which saw substantial outflows, Bank of America strategists revealed in a new weekly report.

According to BofA, bond funds attracted $15.7 billion, cash holdings increased by $13.2 billion, and stock funds saw inflows of $4.9 billion.

Meanwhile, the cryptocurrency sector saw the largest inflow since July, attracting $700 million, while $300 million came out of gold funds.

US equity funds saw their biggest outflows since April, totaling $9.7 billion, while European equity funds saw their biggest outflows since March 2022, losing $6.1 billion.

In contrast, emerging markets (EM) and China equity funds saw the second-highest inflows on record, attracting $15.5 billion and $13.9 billion, respectively.

Strategists note that the rise in Chinese assets on the combination of bearish positioning and profit expectations has been reversed by policy shocks. it is the world’s best performing market to date, up 37%.

“Major investors remain understandably skeptical given US-China relations and China’s aversion to ‘booms,'” BofA strategists say.

However, they believe structural bears “will be forced in” due to a rise in Chinese bond yields from the 2% mark, improvement in house prices from the current -6% annual decline and upward revision of estimates China’s GDP. This pattern was seen after the 2008, 2016 and 2020 stimulus packages.”

Looking ahead to the fourth quarter, the BofA team suggests the best pain trades are “long oil gold” and “long energy utilities.”

However, they caution that any geopolitical boost in oil prices may be short-lived. “In our view, the biggest relative winner of lower geopolitical risk premiums is international equities,” the strategists added.

Regionally, emerging market stocks posted their 18th consecutive week of inflows last week, while Japanese stocks saw their third straight week of inflows, attracting $2.7 billion.

In fixed income, investment-grade bonds continued to attract inflows for the 49th consecutive week, while high-yield bonds posted an eighth week of inflows. Treasuries, on the other hand, saw their third straight week of outflows, losing $200 million.