Equity markets took a hit last week as investors pulled a massive $9.5 billion from stocks—the largest outflow recorded so far in 2025 – according to new data from Bank of America. At the same time, fixed income funds attracted a hefty $19.3 billion, signaling a continued shift toward bonds amid growing market caution.
Alternative assets also drew investor attention. Gold funds saw $1.8 billion in new inflows, with annualized year-to-date figures hitting a record-setting pace of $75 billion. Meanwhile, the crypto space experienced its strongest weekly inflow since January, pulling in $2.6 billion.
Even passive strategies weren’t spared. Exchange-traded funds (ETFs) endured their worst week since December 2024, as capital drained from equity markets across the board.
Bank of America strategist Michael Hartnett doubled down on his 2025 outlook, promoting the “BIG” investment approach—Bonds, International, and Gold—as a central allocation strategy. He reaffirmed his constructive stance on U.S. Treasuries in the wake of “peak tariffs,” and said international markets offer compelling upside potential. According to Hartnett, international stocks are “likely to outperform U.S. in ’25” thanks to more attractive valuations and the rollout of fiscal stimulus in regions like Europe and China.
On the commodity front, Hartnett described gold as the top protection against weakening U.S. currency conditions. Gold, he noted, “remains [the] best hedge for U.S. dollar bear market.”
Beyond broad flows, Hartnett pointed to growing pressure in the stock market’s foundation. Defensive sectors such as Utilities, Consumer Staples, and Healthcare now make up just 18% of the S&P 500—their smallest representation since the dot-com bubble in 2000.
As valuations in both U.S. and Chinese tech soar, Hartnett observed a tactical pivot among investors. Many are seeking balance by combining exposure to America’s top tech names with undervalued equities in overseas markets. He suggested that “a barbell of the Magnificent 7 and rest-of-world (RoW) value” offers a smart way to hedge against extremes in market sentiment.
Despite recent gains in equity market breadth and inflows into high-yield and emerging market debt, Hartnett maintains a preference for longer-term government bonds. “After ‘peak tariffs’ May rally, we see 5% 30-year UST yields more attractive than SPX at 6k,” he stated.
From a regional perspective, Japan experienced its largest-ever weekly equity outflow, with $11.8 billion exiting its stock market. In contrast, emerging market equities notched their best week of 2025 so far, drawing in $2 billion. European equities, meanwhile, saw inflows for the seventh consecutive week.
On the bond front, both investment-grade and government bond funds posted inflows for the fifth week in a row. Emerging market debt funds also saw renewed interest, attracting $2.8 billion – marking their best performance since January 2023.