Investors continued to shift away from stocks to bonds last week, with $19.3 billion flowing into fixed-income funds and $9.5 billion withdrawn from stocks—the largest equity outflow of 2025 so far.
Gold attracted $1.8 billion, with year-to-date inflows annualizing at a record $75 billion, while crypto recorded its highest inflow since January at $2.6 billion.
Passive equity strategies were also hit, with ETFs experiencing their largest weekly outflow since December 2024.
BofA's Michael Hartnett reiterated his preference for the "BIG" allocation—Bonds, International, and Gold—as his primary strategy for 2025.
He remains constructive on US Treasuries after the recent spike in tariffs and believes international equities "should outperform the US in 2025" due to better valuations and emerging fiscal support in Europe and China.
Gold, meanwhile, "remains [the] best hedge against a bear market in the US dollar," Hartnett added.
In the report, Hartnett also highlighted growing signs of tension beneath the surface of equity markets. Defensive sectors like utilities, commodities, and healthcare now represent just 18% of the S&P 500—their smallest share since 2000.
At the same time, investors are hedging their exposure to excessive valuations in the United States and China by combining long positions in US mega-cap technology companies with discounted stocks abroad.
Hartnett argues that "a dumbbell made up of the Magnificent 7 and the values of the rest of the world" is an appropriate way to navigate the extremes on both sides.
Despite the rebound in equity index breadth and inflows into high-yield and emerging market debt, Hartnett sees more compelling relative value in long-duration government bonds.
"After May's 'peak tariff' rally, we find 30-year US Treasuries yielding 5% more attractive than the S&P 500 at 6,000," Hartnett noted.
Regionally, Japan recorded its largest weekly equity outflow ever with $11.8 billion last week, while emerging market equities saw their largest inflow of the year with $2 billion.
Europe extended its streak of equity inflows to a seventh consecutive week.
In fixed income, investment-grade and government bond funds each recorded their fifth consecutive week of inflows, and emerging market debt funds attracted $2.8 billion—marking their best weekly performance since January 2023.