equity market: Rush to cash is at fastest pace since pandemic: BofA

Cash is king and investors are fleeing for the safety of cash at the fastest pace since the coronavirus pandemic as the Federal Reserve says Bank of America Corp strategists say

The asset class saw inflows of $62.1 billion in the week ended Nov. 2, the bank said in a statement, citing data from EPFR Global. That has contributed to $194 billion in cash inflows since early October — the fastest start to a quarter of pandemic-hit markets in Q2 2020.

Bank of America strategists don’t expect the Fed to pivot anytime soon as inflation remains high and unemployment low.

“The lesson is a catalyst for job cuts for 2023,” strategists led by Michael Hartnett wrote in the Nov. 4 note.

A recession and credit events must occur for the Fed to end tightening, triggering the start of a new bull market, Hartnett said. Traders will be watching the upcoming payrolls data closely for signs of a slowdown in the labor market that could convince the central bank to ease its stance. Hartnett’s comments come after Fed Chair Jerome Powell hinted this week that he is prepared to push interest rates as high as needed to stamp out inflation, even if the central bank envisages a downgrade to a slower pace of hikes . The Nasdaq 100 closed Thursday at its lowest level since July 2020, with the indicator on track for its worst week since January. The S&P 500 faces its worst week since September.

Among other asset classes, global equity funds saw inflows of $6.3 billion on the week, while almost $4 billion was withdrawn from bonds, according to EPFR data.

Equities are likely to bottom out in the spring of next year on a “recession shock,” the strategists wrote. After inflation, interest rates and the dollar peak, investors should sell the greenback and buy 30-year government bonds, high-yield bonds, emerging-market assets and small-caps, they said. Bank of America’s custom bull and bear indicator stayed at its “extremely declining” level for the seventh straight week, the longest since the 2008-2009 global financial crisis.

https://economictimes.indiatimes.com/markets/stocks/news/rush-to-cash-is-at-fastest-pace-since-pandemic-bofa/articleshow/95314411.cms equity market: Rush to cash is at fastest pace since pandemic: BofA

Russell Falcon

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