A warning against complacency is issued by Bank of America, emphasizing that it poses an even greater risk than volatility, while cautioning that markets display no signs of stress despite the sharp surge in bond yields and commodity prices.
The yield on the 30-year US Treasury bond has climbed to its highest level since June 2007, while commodity prices are recording a strong rally. Nonetheless, there is «no panic anywhere» across markets, noted strategists led by Jared Woodard in a client note. As they warned, the confluence of blasé market reactions and assertive policy interventions constitutes «a recipe for volatility».
The Bank of America team also highlighted that diesel, rather than headline-grabbing crude oil hovering around $100 per barrel, represents the true economic pressure point investors must monitor. The price of diesel has reached an all-time high of $6 per gallon, threatening to drive up operational costs across shipping, road freight transport, agriculture, construction, and mining activity.
On the artificial intelligence front, the bank observed that, despite capital expenditures totaling $1.5 trillion over a three-year span, there are so far scant indications of productivity gains at the broader macroeconomic level. Total factor productivity (TFP) has in fact slipped below trend, a metric that, according to the strategists, has maintained a close correlation with consumer confidence over the past 50 years.
Capital outflows and fund allocations
Regarding recent fund flows, global equities drew $9.8 billion in the week through September 9, though the three-week moving average has dropped to $7 billion, down from an average of $52 billion in July.
Bonds attracted $17.5 billion, cash holdings took in $12.9 billion, cryptocurrencies drew $1.3 billion, and gold gathered $600 million.
US equity funds logged their largest three-week outflow at $14.2 billion, while Chinese equities recorded their first weekly inflow in six weeks at $1.1 billion. Concurrently, materials sector stocks extended their inflow streak for a 10th consecutive week, attracting $1.9 billion.
In the fixed-income sphere, investment-grade bonds logged inflows for the 23rd consecutive week, amounting to $5 billion, while government bond and US Treasuries funds registered inflows for the 11th consecutive week, totaling $6.6 billion.
Conversely, high-yield debt funds returned to net outflows of $100 million.
At the sector level, technology led capital inflows, drawing $2.2 billion, whereas funds dedicated to consumer goods, healthcare, and utilities registered net outflows.
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