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BofA Sees ‘Zero Capitulation’ as Stock Funds Take In $17 Billion


(Bloomberg) — The brutal selloff this week isn’t scaring investors from putting their money in the stock market.

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In the week that pushed the S&P 500 Index to the verge of a correction, stock funds absorbed billions of cash.

There’s “zero capitulation in equity positioning,” Bank of America Corp. strategists led by Michael Hartnett wrote in a note on Friday. The strategists, who track EPFR Global data, said equity mutual funds and exchange-traded products took in $17.1 billion in the week to Jan. 26.

While it may sound counterintuitive that stocks can go down when fund flows are going up, it’s only a small part of what’s happening in the market, compared with flows in derivatives. Investors mainly track the data as a gauge of market sentiment.

It shows that despite the deep losses in tech stocks, there’s still an appetite for risk among the retail crowd. Stock funds have absorbed $84 billion this year and just two out of the 18 trading days have seen outflows, the Bank of America strategists said.

In the report on Friday, Hartnett described the recent market action as “sell hubris, buy humiliation” in reference to the severe losses in industries like clean energy, social media, crypto and innovation.

The flows data doesn’t entirely show that investors are without fear. Investors increased cash holdings by $14.9 billion, Bank of America wrote.

Bond funds, which have come under pressure as yields rise, recorded the biggest weekly outflow since March 2021, losing $10.2 billion. High-yield corporate bonds saw the largest outflows since September 2020.

One bright spot: emerging market stocks. The group had their largest inflow in almost a year.

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