Investors Expected to Shift to International Stocks Following China Stimulus, According to BofA

Investing.com reported that over $129 billion was invested in cash funds for the week ending September 25, according to Bank of America. This represents the highest inflow seen in 18 months.

In contrast, equities garnered $25.4 billion, with U.S. stocks receiving an inflow of $10.9 billion. This brings the year-to-date (YTD) inflows for equities to a remarkable annualized total of $363 billion, marking the second-largest figure on record.

European stocks experienced their highest inflow in five months, totaling $600 million, while emerging market equities saw the fourth-largest inflow of 2024 at $9.7 billion. Although technology funds faced minor outflows of $200 million, the year-to-date inflows in that sector are set to reach an impressive $60 billion, potentially establishing a new record.

Bank of America strategists note that Wall Street’s positioning includes long investments in gold and technology, as well as short positions in 30-year Treasuries and China. They express the view that the current bullish shift is likely to persist until a recession prompts a move from stocks to bonds, or until a chaotic rise in bond yields disrupts the leadership of gold and tech.

The bank’s analysts suggest that investors might look towards international equities, especially in light of China’s ongoing stimulus efforts aimed at fostering growth through measures such as lowering the reserve requirement ratio (RRR) and reducing mortgage rates for households.

However, the bank does warn that if the Chinese stimulus measures fail, geopolitical risks are expected to rise significantly.

In terms of other weekly flows, investment-grade (IG) funds attracted an inflow of $10.2 billion, bringing YTD inflows to an annualized total of $415 billion, a record-setting pace. Conversely, U.S. Treasuries experienced a $1.6 billion outflow, which is the largest over a four-week period since December 2023. Emerging market debt saw an inflow of $1.2 billion, the largest since January 2023.