Investors sought shelter in cash and U.S. Treasuries and dumped gold and equities as markets braced for a bumpy ride as central banks raise rates aggressively in the face of slowing economic growth, BoFA Securities said in a weekly note on Friday.
Investors squirreled $62.6 billion into cash and $2.4 billion into bonds, BoFA said citing EPFR data. The week ending July 6 marked the biggest inflow into U.S. Treasuries in eight weeks, while emerging market equities saw the biggest outflow in eight weeks.
“The simple truth remains that the second half is most likely to be one of slowing growth and rising rates,” BofA analysts said led by Michael Hartnett.
“Bear markets end with a recession or an event that causes Fed to reverse policy.. bear markets aren’t over and the Big Low has yet to be reached.”
A market indicator measuring how investors are positioned held at “extremely bearish” levels for a fourth consecutive week. Outflows from European equity funds extended into its 21st week, while emerging market debt has now seen outflows for the past 13 weeks.
In other notable highlights, a U.S. Treasury bond market volatility gauge held above 150 for only the 11th time in the past 35 years, levels coinciding with recessions or default.