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The pace of cash inflows is slowing while bonds attracted the largest inflow in 6 weeks. Similarly, inflows in Tech were the largest since December 21. On the other hand, Financials attracted the largest outflow since May 2022.
BofA strategists highlighted the stock market’s outperformance recently with Nasdaq up 10% since the SVB failure.
“SPX up 11%, Nasdaq up 15% in 2 months after Bear Stearns Mar’08; SPX up 7%, Nasdaq up 10% in 2 months after SVB; just as then credit & tech lead a 10- week rally which reversed in Q3, but unlike then defensives outperforming cyclicals as REITs, banks, energy, small caps currently tattooed with “hard landing”,” the strategists wrote in a client note.
They also argue that it is “maybe not a good idea for Fed to pause when inflation 5%.”
“Maybe June risk isn’t debt ceiling but another month of “rate hike” jobs & inflation data,” they concluded.
