Investors still pouring into cash, but pace slows – BofA

By Lucy Raitano

LONDON (Reuters) -Investors pumped $25.1 billion into cash in the week to Wednesday, but the flow into cash funds has slowed recently, reflecting a greater degree of investor confidence, according to a report from BofA Global Research on Friday.

A total of $151 billion went into money market funds over the last four weeks versus $404 billion in the four weeks after Silicon Valley Bank collapsed in March and the banking sector was engulfed in turmoil, the BofA report showed.

Meanwhile, investors bought $5.6 billion of bonds and pulled $7.7 billion from equity funds in the week to May 17.

The report also showed U.S. Treasuries clocking up 14 straight weeks of inflows, with investors buying $4.3 billion in the week to May 17.

They also showed a preference for investment grade bonds – which have seen inflows for seven weeks and a weekly inflow of $4.9 billion – over high yield bonds, from which investors pulled $2 billion last week.

The BofA analysts said a 60/40 portfolio, which typically allocates 60% of assets into stocks and 40% into bonds, has recorded a 28% annualized return in 2023, turning things around after a “disastrous” 2022.

A total of $1.1 billion went into tech stocks, marking a fifth week of inflows, as investors chose growth names over value.

Investors took $700 million out of financial funds, while real estate investment trusts saw their largest outflows since November 2022, totaling $600 million.

Looking forward to the next 12 months, BofA said the “biggest pain trade” will be Federal Reserve interest rates at 6% rather than 3%.

BofA said its bull and bear indicator – a measure of market sentiment in which a higher reading is more bullish – jumped from 3.4 to 3.5, its highest level since March 14.

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