Market Flows Report: Shifts in Asset Allocations

In the week ending December 13, money-market funds witnessed their initial outflow in eight weeks, totaling $31 billion, as reported by Bank of America’s strategists. In contrast, equities emerged as the favored asset class, experiencing their most substantial inflows over the same period, attracting $25.3 billion, according to data from EPFR Global, as highlighted by BofA. Bonds also garnered positive attention with inflows of $2.1 billion, while gold saw a modest inflow of $45 million.

Despite the considerable inflow into money-market funds, cash remains the primary winner in 2023, with $1.2 trillion in inflows contributing to a noteworthy 25% increase in assets under management (AUM), reaching $5.9 trillion.

While there is an emerging expectation that a significant reduction in cash assets could drive further increases in risk assets in 2024, BofA’s strategists exercise caution, noting that historical trends do not uniformly support this assumption.

In terms of equity flows, the report emphasizes that equities recorded their most substantial eight-week inflow since March 2022, with $74.0 billion entering the asset class. However, Treasuries experienced their second consecutive week of outflows at $3 billion, and emerging market (EM) debt sustained its 20th consecutive week of outflows at $2 billion.

Analyzing the regional breakdown of equities, U.S. equities maintained their ninth consecutive week of inflows at $25.9 billion, marking the longest streak since December 2021. EM equities saw their second consecutive week of inflows at $4 billion, Japan witnessed inflows resume at $200 million, while Europe sustained its 40th consecutive week of outflows at $1.5 billion.

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