BofA’s Hartnett Says US Stocks Hit by Outflows as Rally Stalls

Bank of America's Michael Hartnett reports significant investor capital rotation, with nearly $28 billion redeemed from US equities in the week through August 6, signaling a stalling US stock rally. Concurrently, money market funds attracted a substantial $107 billion, marking their largest inflow since January, as renewed concerns over tariffs impeding economic growth drive a flight to cash.

Analysis

A significant risk-off sentiment has emerged among investors, evidenced by a substantial capital rotation out of US equities and into cash-equivalent assets. According to a Bank of America note citing EPFR Global data, the week ending August 6 saw nearly $28 billion in redemptions from US stocks. Concurrently, money market funds experienced inflows of approximately $107 billion, marking the largest such influx since January. This pronounced flight to safety is directly attributed to renewed concerns that extensive tariffs are negatively impacting economic growth. The scale of these flows indicates a material shift in investor positioning and provides a clear quantitative explanation for the recent stall in the US equity rally, reflecting a strongly bearish turn in market sentiment.

Key Decisions for Investors

• Given the significant outflows from equities driven by tariff concerns, investors should reassess their risk exposure and consider a more defensive portfolio allocation.
• Monitor weekly fund flow data closely as a leading indicator of whether this flight to safety is a short-term reaction or the beginning of a more sustained bearish trend.
• Place a heightened focus on geopolitical news related to trade policy, as the data confirms that tariff developments are a primary catalyst for current market volatility and capital shifts.