LONDON, Dec 9 (Reuters) - Investors sold stocks and bought gold in the week to Wednesday, withdrawing $5.7 billion from equity funds, BofA Global Research said on Friday, a week of "small, joyless flows", as markets position for the approaching end of the Fed's rate hiking cycle.
Both stocks and cash recorded outflows of $5.7 billion, in the week to Wednesday, while bond outflows stood at £0.1 billion and gold funds got a $65 million boost, BofA said, citing EPFR data.
Beaten-down stocks and bonds have rebounded in the past month on hopes that the relentless pace of rate hikes by global central banks is coming to an end, but the rally fizzled out this week ahead of next week's U.S. consumer inflation data and meetings by the Federal Reserve, the European Central Bank and Bank of England among others.
The market is awaiting U.S. producer price data due on Friday afternoon.
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"Weekly Flows: inflow to gold funds of $65mn, outflow from bonds $0.1bn, cash $5.7bn, & stocks $5.7bn…small, joyless flows," BofA said.
BofA private clients put cash into equities for the first time in 11 weeks, and bought bonds for the 41st week in a row, the report said.
Emerging market debt outflows stood at $0.3 billion, recording their 16th consecutive week, while emerging market equity fund outflows resumed at $0.8 billion, after inflows for the previous six weeks.
BofA analysts expect the U.S central bank to stop hiking rates in March 2023, but they say the uncertainty in the market is justified.
When it comes to the Fed's meetings in December, February and March they say oil price falls suggest a 50 basis point hike, followed by 25 bps and then nothing, "cooling housing says 50/25/25 bps, solid credit market says 50/50/25, the hot labor market says 50/50/50."
Whether the end of rate hikes is a signal to buy or sell depends on if the environment is inflationary or disinflationary: "Sell last hike" in inflationary world, "buy last hike" in disinflationary world," the analysts said.
They expect inflation to fall in 2023, but highlight that the three big themes for the 2020s are inflationary; climate change, and the move from globalisation to regionalisation and inequality to inclusion.
BofA's "Bull & Bear" indicator jumped to 2.6 from 2, driven by bond inflows.
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