US Equity Funds Set Record Inflows in 2024

Investing.com reports that US equity funds are poised to conclude 2024 with an unprecedented $480 billion in annual inflows, as noted by Bank of America’s recent weekly report.

China equities also witnessed significant movement, garnering their largest weekly inflow in nine weeks amounting to $5.6 billion during the week ending December 11.

In terms of asset flows for that week, bond funds attracted $10.6 billion, stocks $8.8 billion, cryptocurrencies $4.1 billion, and gold $200 million, while there was an exit of $11 billion from money market funds.

Notably, healthcare experienced its largest outflow since February 2023, totaling $1.7 billion, indicating a pronounced sectoral shift.

Michael Hartnett, a strategist at BofA, pointed out investor capitulation into AI leading firms, revealing that the “Magnificent Seven” mega-cap tech stocks have a trailing price-to-earnings (P/E) ratio of 62 times, surpassing previous bubble highs.

Despite these inflows, poor equity breadth persists, with only 31% of S&P 500 constituents outperforming, resembling trends seen in the late 1990s. Hartnett remarked that historically, only central banks can halt market melt-ups, predicting the Federal Reserve will likely cut rates in its upcoming meeting.

On the global front, Hartnett noted that China’s H-shares have outperformed the S&P 500 this year, facilitated by the “easiest financial conditions” since June 2020. He added that China's trade surplus has recently reached a record high, with its share of global car production skyrocketing from 1% to nearly 40% over the last two decades.

Strategists maintain that Chinese stocks are set to continue their upward trajectory, with numerous entry points for international investors considered particularly attractive, especially ahead of possible Q1 tariff adjustments.

Hartnett mentioned, “Trump wants growth not inflation, and if consensus is too fearful of Q1 tariffs, Chinese stocks are set to outperform even more.”

In regional trends, US equities saw their 10th consecutive week of inflows last week, totaling $13 billion.

Emerging markets (EM) stocks continued their positive momentum, attracting $3.4 billion for the second straight week, while Japan and Europe experienced outflows of $3.5 billion and $2.6 billion, respectively.

In fixed income, trends varied. Investment-grade bond funds extended their inflow streak to 59 weeks with $9.6 billion, while high-yield bonds reported their first outflow in 18 weeks, amounting to $300 million. Treasury funds also marked a second week of outflows, totaling $1.8 billion, whereas bank loans gained traction, receiving $1.3 billion for a consecutive 10-week streak.