Equities see US$27b inflows as reflation trade gathers pace: BofA
[LONDON] Investors stormed into financial and energy stocks last week, BofA's weekly fund flow statistics showed on Friday, frontloading positions on expectations US President-elect Joe Biden was planning a huge stimulus package.
Mr Biden on Thursday announced a US$1.9 trillion plan to help the US economic recovery and step up the fight against Covid-19, more than markets had expected.
The reflation trade saw stocks bagging US$26.8 billion inflows, with energy attracting US$3.6 billion, the second highest ever. Financials, meanwhile, saw a "meaty" US$2.1 billion flowing in, the US investment bank said citing EPFR data.
Investors poured US$1.8 billion into Treasury inflation-protected securities (Tips) amid rising inflation expectations. In the US, the 10-year Tips is now pricing in average annual inflation of 2.09 per cent for the next decade.
With inflation expectations dominating market action, BofA said inflation assets outperformed deflation assets in 2021 by the most since 2006.
Emerging market equities saw their sixth largest inflow ever at US$7 billion, the report said, along with a record inflow of US$2.5 billion into municipal bonds driven by tax expectations.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Global stocks as measured by MSCI's All Country World index hit record highs this week.
BofA's Bull and Bear indicator remained unchanged at 7.1, indicating that a peak in positioning had been postponed.
The bank said that with at least 32 million vaccine doses administered in the past 12 weeks, the global vaccine rollout has significantly lagged its projections.
However, the bank's base case still favours vaccines prevailing over the virus, a reopening over a recession, more fiscal stimulus, and a rotation in stocks.
REUTERS
KEYWORDS IN THIS ARTICLE
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Banking & Finance
Great Eastern chairman appeals for patience as shareholders fume over share price ‘disaster’
S&P Global first-quarter profit beats estimates on strong product demand
Thai banks cut rate for some borrowers after push from PM
Money laundering accused who faces 22 charges to plead guilty on May 14
BNP Paribas beats estimates as lower costs offset trading slump
Japan brokerage Daiwa’s Q4 profit more than doubles as markets recover