Investing Highlights from Bank of America

According to a recent report from Bank of America, cash contributed the majority of money flows last week, while crypto funds saw a significant increase in inflow.

Money market funds experienced an influx of $136.4 billion for the week ending December 4, the highest since March. In addition:

• Stocks drew $8.2 billion
• Bonds received $4.9 billion
• Crypto funds attracted $3 billion
• Gold faced an outflow of $400 million

Notably, crypto funds recorded their largest-ever four-week inflow of $11 billion, driven by boosted investor interest in digital assets following Donald Trump's recent electoral victory.

Michael Hartnett, a strategist at BofA, noted the presence of "froth" in the crypto markets as Bitcoin’s market capitalization exceeded $2 trillion, ranking it as the 11th largest economy globally.

Concerns about stock valuation were also emphasized, with the S&P 500’s price-to-book ratio reaching 5.3, surpassing levels seen in March 2000. Hartnett cautioned of a high risk for an "overshoot" in the S&P 500 in Q1 2024, predicting possible moves toward 6,666 as the US dollar approaches parity with the euro.

On macroeconomic fronts, the strategist predicted that the Federal Reserve may ease rates in its upcoming meeting on December 18 unless November US payroll figures exceed 275,000 and Average Hourly Earnings grow by more than 0.3%.

Regionally, US equities posted their ninth consecutive week of inflows with $8.2 billion, while emerging markets resumed inflows totaling $600 million. Conversely:

• European equities experienced their tenth consecutive week of outflows, losing $5.1 billion
• Japanese equities saw an outflow of $600 million for the third week

In fixed income, investment-grade bonds continued their streak with $7.3 billion added over 58 weeks. High-yield bonds also gained $500 million, keeping a 17-week inflow streak. However, Treasury funds faced resumed outflows of $4.4 billion, along with $300 million outflows each from emerging market debt and TIPS.

Bank loans attracted $1.1 billion, marking their ninth straight week of inflows, and municipal bonds added $100 million, maintaining a 23-week streak.