LONDON, March 25 (Reuters) – The Bank of America (BofA) bull & bear market sentiment indicator moved into the buy zone for assets deemed the riskiest for the first time since March 2020 as investors are abandoning bonds in favor of “cash”, write the strategists of the American investment bank in their weekly note.
Ranging on a scale of 0, “excessively bearish”, to 10, “excessively bullish”, this indicator fell from 2.3 to 2.0, a figure that marks the triggering of the buy signal.
It hadn’t happened since mid-March 2020, in the midst of the first wave of the COVID-19 pandemic.
The analysis shows that “within 12 weeks of a buy-signal, global equities rose 8%,” says BofA.
Since March 13, the Standard & Poor’s-500 has rebounded about 8% after hitting a nine-month low in February on Russia’s invasion of Ukraine and inflation fears.
“We think the strong March rally can continue, but the fundamental view for 2022 is an inflation shock, a rate shock, a growth shock, which gives a strong selling opportunity, that we look forward to the second quarter,” BofA analysts said.
The U.S. bank’s investment flow study shows that in the week to March 23 liquidity funds attracted $13.2 billion (€12 billion), funds specializing in $2.1 billion in gold while the bond portion of their portfolios suffered withdrawals of $200 million and equities $1.9 billion.
Bond funds recorded 11 consecutive weeks of capital outflows, the largest series since the fourth quarter of 2008. (Report Julien Ponthus and Laetitia Volga, edited by Jean-Michel Bélot)