Investing.com -- Investors continued to favor money market funds, bonds, and crypto, while equities saw modest outflows last week, according to Bank of America (NYSE:BAC).
For the week ending Feb. 5, money market funds attracted $46.8 billion, bonds saw $16.6 billion in inflows, and crypto funds gained $2.2 billion. Gold also had a small $100 million inflow. Meanwhile, $600 million exited equity funds.
Among notable weekly flows, investment-grade bonds recorded their largest inflow since November at $10.4 billion. Emerging market (EM) debt saw its biggest two-week inflow since February 2023, totaling $2.5 billion, while Japan had its strongest inflow since October, drawing $1.4 billion.
On the sector side, technology funds experienced their first outflow in five weeks at $700 million, while consumer stocks had their biggest inflow since October at $800 million.
Bank of America strategists led by Michael Hartnett highlighted that US stocks, gold, and crypto are all trading at all-time highs, yet US Treasury prices remain 50% below their 2020 peak.
According to Hartnett, investors are currently positioned for a rally in US stocks, the dollar, and Treasury yields as a potential Trump 2.0 scenario reinforces “US exceptionalism-squared.”
He notes that investors’ positioning plan is to "stay risk-on until a 2nd wave inflation causes Fed hikes" or a significant downside surprise in US growth materializes driven by a potential fiscal tightening, a slowdown in payrolls below 50,000, or a credit event.
Looking further ahead, the strategists expect a contrarian outperformance of bonds, international stocks, and gold in 2025.
Regional fund flows in the past week reflected continued interest in US stocks, which saw their sixth consecutive week of inflows at $200 million in the latest week.
Emerging markets resumed outflows at $200 million, while Japan returned to inflows with $1.4 billion. European equity funds extended their outflow streak to 19 weeks, shedding another $400 million.
Fixed income flows remained strong, with investment-grade bonds posting their 67th consecutive week of inflows at $10.4 billion. High-yield bonds saw a third week of inflows at $1.7 billion, and emerging market debt recorded its second week of inflows at $1.1 billion.
Meanwhile, US Treasuries had their first outflow in seven weeks at $300 million, while bank loans extended their inflow streak to 18 weeks, adding $2.8 billion.