LONDON, Sept 18 (Reuters) - Investors poured money into US stocks at the fastest pace in three months and yanked cash from corporate bonds in the latest week, according to a Bank of America Global Research report on Friday.
This week has seen the world's largest central banks take aim at inflation, either raising interest rates or signalling that they stand ready to do so, as oil remains above $100 a barrel and price pressures stemming from the war in the Middle East start to spread through the economy.
The bank's weekly "Flow Show", which uses data from EPFR, showed that in the week to Wednesday investors put a net $79.3 billion into stocks, with $63.8 billion into US stocks, while drawing down $1 billion from investment-grade bonds and $2.5 billion from high-yield.
BofA said the "three Ps" — positioning, policy and profits — were all peaking. It said positioning remained too bullish, profits looked set to peak next year, and Federal Reserve monetary policy is now starting to tighten up.
"Clearly, the 'run it hot' policy posture is done," the bank said.
The key risks for the fourth quarter, meanwhile, are the "three Cs" — commodities, credit and Chinese bonds, BofA said.
A basket of commodities led by oil has risen 47% in 2026 and ever-tighter supply, especially in diesel, risks bringing higher inflation.
High-yield credit spreads, which tend to widen when interest rates rise, are near record lows and a "sudden repricing of credit risk would be the most likely signal that the Fed is overestimating GDP", the bank said.
A possible deflation-related "China Shock 2.0" in Europe is visible in a record German trade deficit and falling German industrial production, the bank said, adding China is the only major economy with falling bond yields in 2026.
Reporting by Amanda Cooper; Editing by Jan Harvey
