Money market funds experienced their largest outflows since April 2024, with $83.5 billion withdrawn in the week ending January 15, according to Bank of America’s latest report.
During the same period, stocks attracted $13 billion in inflows, bonds gained $11.4 billion, and gold saw $1.3 billion in new investments. In contrast, cryptocurrencies faced $900 million in outflows.
BofA strategists, led by Michael Hartnett, highlighted that commodities have been the top-performing asset class since the Federal Reserve’s 50 basis point rate cut in September. Hartnett advises staying long on commodities, citing factors like rising global PMIs, an expanding Chinese money supply, and a peak in the U.S. dollar. However, he recommends shifting focus from oil to gold as geopolitical tensions in regions like Russia, Ukraine, and the Middle East ease.
For equities, Hartnett sees downside protection from Trump’s policies but notes that upside potential is limited due to factors like market concentration, high valuations, and investor positioning.
The strategist is optimistic about rate-sensitive sectors such as homebuilders (XHB), utilities (XLU), financials (XLF), and REITs. Additionally, BofA favors international equities for 2025, particularly in Europe, China, and emerging markets, driven by policy easing, undervalued currencies, attractive valuations, and declining geopolitical risks.
Regionally, U.S. equities recorded a third consecutive week of inflows, totaling $11.6 billion, while Japanese stocks saw their highest inflows in 11 weeks at $1.1 billion. In contrast, emerging markets faced $2.2 billion in outflows, and European equities marked their 16th straight week of redemptions, losing $700 million.
In fixed income, investment-grade bonds continued their impressive streak, with $5.5 billion in inflows over 64 weeks. U.S. Treasuries gained $3.5 billion for a fourth consecutive week of inflows. However, high-yield bonds saw outflows of $100 million, while emerging market debt recorded $300 million in outflows for the second straight week. Bank loans remained resilient, adding $2.1 billion in their 15th consecutive week of inflows.
