Global and U.S. equity funds experienced their largest weekly inflows since December, according to Bank of America data.
Investors added $68.4 billion to global stock funds in the week ending September 17, with $57.7 billion directed into U.S. equities. Emerging markets attracted $7.6 billion, marking a five-month high, led by $5.4 billion into China.
Cash funds recorded $4.8 billion in outflows, the first in seven weeks, while bond inflows totaled $14.3 billion, the lowest level in three months.
Bank of America strategists, led by Michael Hartnett, said the data highlights the political risks for President Donald Trump, whose disapproval on inflation stands at 59%.
“Asset price inflation begets consumer price inflation,” Hartnett wrote, emphasizing that U.S. household equity wealth has increased by $6 trillion this year.
He warned that a second wave of inflation could be “very risky before ’26 midterms,” likely pushing Washington to tighten price controls in sensitive sectors like “Big Pharma & Big Energy.”
As household energy costs rise, Hartnett added, “Big Utilities [are] next most vulnerable sector.”
The strategist also framed the ongoing rally in the Magnificent Seven tech stocks as potentially having further upside, drawing comparisons to past equity bubbles. The group has risen about 223% from 2023 lows, with a trailing P/E ratio of 39, compared with average bubble gains of 244% and multiples of 58, according to BofA.
For investors navigating this environment, Hartnett suggested a barbell approach — pairing exposure to expensive U.S. tech with value trades in regions like Brazil, the U.K., and global energy.
Other strategies highlighted include shorting corporate bonds of bubble-prone companies, or bonds more broadly, as inflation pressures could eventually drive policy rates higher.
Fixed income flows mirrored the cautious sentiment: investment-grade bond funds saw inflows of $6.7 billion, high-yield debt added $2 billion, emerging-market debt took in $0.3 billion (continuing a 22-week streak), and municipal bonds recorded inflows for the 15th consecutive week.
Regionally, Japanese funds had small inflows for a third consecutive week, while Europe posted its first outflow in three weeks.
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