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Investors have continued to exit stocks and bonds in a week to Wednesday, June 29, Bank of America strategists led by Michael Hartnett wrote in a client note today.
Global outflows from stocks and bonds were at $5.8 billion and $17 billion, respectively, in addition to $1.1 billion outflows from gold.
Hartnett highlighted that inflows to stocks are flat in the last four months. Although Fed hike expectations are peaking, inflation expectations are not peaking.
“In Q2’22 commodity gains moderated (8.4% vs 35.0% in Q1)…”inflation shock” consensus, big gains in US$ (6.9%), big losses govt bonds (-9.5%), massive losses crypto (Bitcoin -58.1%)…”rates shock” begins, accelerated losses in credit (HY -10.9% vs -6.0%) & stocks (-14.6% vs -5.3%)…”recession shock” begins; key asset prices H2 = depth of recession given “credit shock” & geopolitical risks,” Hartnett wrote in a client note.
As far as the sectors are concerned, the week through June 29 was the 14th consecutive week of outflows from financials. Moreover, it also marked the largest outflow ever from resources (materials and energy).
Hartnett also reminded clients that recession chances are rising.
Finally, the Bank of America (NYSE:BAC) Bull & Bear Indicator has remained at 0, which signals “maximum bearishness” among investors. A reading below 2.0 signals “buy”.
“3 month returns following “buy” signal strong so long as no 2SD event (e.g. WorldCom Jul’02, Lehman Sep’08, UST downgrade Aug’11, China deval Aug’15,” Hartnett concluded.
