Money market funds attracted $106.7 billion in inflows in the week ended August 6, the largest inflow since January, Bank of America (BofA) said.
Bonds attracted $28.5 billion, the largest combined inflows into investment-grade and high-yield bonds since June 2020.
Gold saw $200 million in redemptions, while cryptocurrency funds lost $1.9 billion, the most since March.
Equities saw $41.7 billion in outflows, which Bank of America said was entirely due to unusual liquidation redemptions from three UK-domiciled funds on July 31.
Bank of America strategists led by Michael Hartnett said the "Magnificent Seven" plus Broadcom (NASDAQ: AVGO ), Oracle Financial Software (NYSE: ORCL ) and Palantir (NASDAQ: PLTR ) have contributed 80% of the S&P 500's gains since "Liberation Day."
The team said the performance advantage stems from the concentration of U.S. stock returns, "America First" policies that support monopolies, and the potential disruption of the labor market by artificial intelligence.
They expect this trend to continue until credit spreads widen in the tech sector, which would signal AI cash burn risks and threaten what they call "AI overbuild" deals, echoing the tech bubble of the late 1990s.
Hartnett also said that the current market view is a "moderate growth consensus," with 60% of clients expecting "lower interest rates = higher stocks," a view supported by the market's implied 95% probability of a Fed rate cut in September and a 12% increase in the S&P 500's forward earnings per share forecast to $285.
Another 30% of clients see the risk of an "inflation boom/bubble," a scenario where "rising stocks = rising yields," which Hartnett also calls the "down dollar trade."
Only 10% of clients expect stagflation, and no one sees deflation as a near-term risk.
Hartnett maintains a long-term bullish stance on gold, though he notes that conditions of "peace, not war," are generally negative for the yellow metal. He argues that "everything else" points to higher prices for gold and cryptocurrencies, as investors may need to hedge against what he describes as Trump's efforts to fuel an economic "boom and bubble" ahead of the midterm elections.
Hartnett believes gold will benefit in the 2020s from persistent inflation, geopolitical isolationism, stricter immigration policies, greater state intervention, reduced central bank independence, and the possibility that central banks — which hold 20% of global foreign exchange reserves in gold — may be forced to revalue their reserves to reduce domestic debt burdens.
By region, U.S. stocks saw outflows of $27.7 billion, Europe saw outflows of $700 million, emerging markets saw outflows of $3.6 billion, and Japan saw outflows of $3.1 billion over the past week.
In fixed income, investment-grade funds saw $19.3 billion of inflows, high-yield bonds saw $2.9 billion, Treasuries saw $1.7 billion, bank loans saw $1.1 billion, and emerging market debt saw $1.7 billion, marking the 16th consecutive week of inflows.