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Here’s How Money Moved This Week — ICYMI

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Stocks rose Friday, but they’ve been stuck at their stretched valuations for almost a month, as the market awaits several key developments. 

Here’s how global capital moved this week, according to Bank of America’s fund manager survey:

  • Stocks: -$7.6 billion (that’s an outflow)
  • Bonds: +$17.8 billion (that’s an inflow) 
  • Cash: -5.9 billion
  • Gold: +$3.5 billion 

Investors have built up a war-chest of cash since early February — just under $5 trillion worth. That’s up from just over $3 trillion. This past week, investors have used some of that cash to buy bonds. Market prices show a slightly risk-on move, with the S&P 500 up more than 2% for the week -- as are major European and Asian indices -- and the 10-year treasury yield up to 0.66% from 0.64% at last Friday’s market close. Yields rise when bond prices fall. 

Market prices can move up while capital flows out of those assets.

Many investors are ditching the idea of a V-shaped recovery, or a quick one, from the coronavirus-induced pandemic recession. Stocks shot higher for a bit over month after their late March low, but the gains have stagnated since the end of April. Low interest rates -- which are remaining so -- have helped push valuations to historically high levels, while investors also look past an ugly 2020 and into 2021. 

But investors are still holding cash and bonds to protect against equity market downside in the near-term. 

The big concerns: a second wave of virus infections upon premature state reopenings, rolled back trade agreements between the U.S. and China and delayed progress on a virus vaccine.  

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