800 rate cuts on and investors throw money at everything: BofA

Investors poured money into most asset classes last week, with bond funds attracting $23.6 billion and equities and emerging markets benefiting too, analysts at BofA said, noting the high levels of cheap money available after 800 rate cuts worldwide since the financial crisis. Bond funds saw their biggest weekly inflows ever, while equity funds pulled in $12.5 billion in the week to Wednesday, mainly driven by technology and emerging market stocks as fears over the impact of the coronavirus eased.

As infection rates slowed, high-yield bonds saw their strongest weekly inflows in 21 weeks at $3.4 billion and emerging market equities pulled in $2.7 billion, the bank said. Risk assets such as the U.S. benchmark S&P 500 .SPX and the pan-European STOXX 600 indexes set fresh records in the week, driven by ultra-loose monetary policy and a thriving tech sector.

BofA’s chief investment strategist Michael Hartnett said the bank remains “irrationally bullish” in the first quarter as positioning is not yet “euphoric”. The S&P 500 is currently trading at a 12-month-forward price-to-earnings ratio of 18.8, well above its 30-year average, and Hartnett recommended his clients sell stocks when the ratio crosses 20. Tech stocks have been the biggest drivers of the index’s surge over the last decade, even though the U.S. Federal Trade Commission has recently raised concerns that companies such as Apple (AAPL.O), Facebook (FB.O) and Amazon (AMZN.O) are unfairly engaging in potential anti-competitive behaviour.