(Adds analysts' comments, background)
LONDON, March 3 (Reuters) - Investors poured more money
into cash funds in the week to Wednesday than at any time since
the depths of the pandemic in 2020, a report from BofA Global
Research showed on Friday.
Cash funds saw inflows of $68.1 billion, BofA said citing
EPFR data. As per previous flow reports from the bank, this is
the largest influx into cash since a $126.4 billion inflow in
the week of April 24 2020.
Global shares hit two-month lows while bond
yields surged in the latest week, as investors assessed a raft
of data that has reinforced the belief that interest rates
aren't going to peak any time soon and no cuts will materialise
this year.
Investors ditched equities and gold, which tends to suffer
in an environment of rising real interest rates.
Describing inflation as a "secular reality" rather than a
"cyclical theme", the BofA analysts hailed the end of an "era of
extraordinary monetary policy".
In light of higher inflation and higher interest rates, they
note cash will be "as good as bonds & stocks" until the bear
market comes to an end with an expected credit event.
Such a credit event could originate from the "Anglo-Saxon
real estate" sector which has been hit by higher rates, the BofA
analysts wrote.
The bank pointed to U.S. mortgage applications being at
their lowest since April 1995, while house prices in the United
States, the UK, Canada, Australia and New Zealand were either
falling or stagnating.
They advise long-term investors to buy assets considered
"solutions to society's problems" such as infrastructure,
inequality and climate change, but also to buy assets that lost
out under the zero-rate environment such as value stocks, banks
and European assets.
Bonds saw inflows of $8.4 billion, while global stocks
recorded outflows of $7.4 billion and investors pulled $900
million out of gold funds.
Investors meanwhile shed $1.8 billion in emerging market
debt and bought $2.4 billion in emerging market equities.
BofA's bull and bear indicator - a measure of market
sentiment - ticked up marginally to 4.3 from 4.2 the previous
week.
(Reporting by Lucy Raitano; Editing by Amanda Cooper and
Shounak Dasgupta)
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