Capital flows into Cash Funds highest since COVID-19
Investors are increasingly turning to cash funds, according to a recent report by BofA Global Research. The week ending March 1 saw the largest inflow of capital into cash funds since the start of the COVID-19 pandemic in 2020, with $68.1 billion recorded by EPFR data.
Investors are increasingly turning to cash funds, according to a recent report by BofA Global Research. The week ending March 1 saw the largest inflow of capital into cash funds since the start of the COVID-19 pandemic in 2020, with $68.1 billion recorded by EPFR data. This trend is driven by investors' fears of rising inflation and interest rates, as strong economic data has led many to believe that interest rates will remain high for some time.
As a result of this trend, stocks and gold have suffered, as they tend to underperform in an environment of rising interest rates. However, bonds recorded a capital inflow of $8.4 billion, while investors also bought $2.4 billion in emerging-market stocks during the same period. BofA's sentiment gauge increased slightly to 4.3 points, indicating a slight increase in investor confidence.
But while cash may be an effective asset channel for investors until the bear market ends, BofA analysts warn that a credit event may be on the horizon. This could be traced back to the real estate sector, which has been hit hard by rapidly rising interest rates. Mortgage applications in the US are at their lowest level since April 1995, while home prices in the US, UK, Canada, Australia, and New Zealand are all falling or flat.
Overall, the report suggests that investors are becoming increasingly cautious, as the prospect of rising inflation and interest rates looms large. While cash funds may provide some protection in the short term, investors may need to brace themselves for a bumpy ride ahead.
Capital flows into Cash Funds highest since COVID-19
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