Inflows into equities approached a record high last week as bets on the formation of a bottom spurred a big buying slump in US stocks. The optimism, however, is probably premature, according to Bank of America.
Analysts at the bank said in a note on Tuesday that allocations to shares reached the third highest sum since 2008 during the five-day period, according to client data, a sign investors believe indicates the market sell-off is on. coming to an end. But BofA challenged the notion that the worst is over for the stock market.
“Last week, during which the S&P 500 rallied 1.5% from recent lows, customers were large net buyers of US equities,” the analysts said, noting that total inflows of $6.1 billion were the third largest entry in the banks’ data history since ’08 and the fifth consecutive week of earnings “Our opinion? More volatility is likely ahead.”
After rallying during the first two days of last week, a drop in the business day erased much of the gains. Still, stocks managed to end the week higher after three straight weeks of losses.
Bank of America noted that the broad-based buying spree in US stocks ranged from individual stocks to exchange-traded funds, while the purchases spanned hedge funds, institutions and individual investors. Institutional investors were the biggest buyers, posting their first inflow in a month and the biggest inflow since December 2020.
A set of weak economic data early last week fueled hopes that the Federal Reserve may walk away from aggressive monetary tightening sooner than planned, but Wall Street strategists have questioned that hopeful notion.
Analysts at Goldman Sachs said on Tuesday that it was “too early to price in a pivot”, adding that with expectations of more rate hikes, the risk of further declines remains for US equity markets.
JPMorgan CEO Jamie Dimon also said shares could fall an “easy 20%” from current levels in a hard landing scenario, as analysts at his bank warned that another consumer price reading on Thursday could trigger a 5% drop in the S&P 500.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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