Economists and investors seem to agree that economic growth will slow further in the second half of the year and that the US Federal Reserve will continue to hike interest rates.
You can count Bank of America’s strategists on that consensus. But first, take a look at investment flows.
According to BofA, citing EPFR data, the week ended July 6 saw a $62.6 billion cash inflow, some related to the end of the quarter, and a $2.4 billion cash inflow Bond funds what was the 14th biggest week.
The gold fund saw an outflow of $2.1 billion, the largest since March 2021; And equity funds saw an outflow of $4.6 billion.
It’s hard to do more activity each week. But bond prices rose in the week of June 27 on recession concerns, which may explain the inflows into bond funds.
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A recession will also hurt stocks, and a deflationary recession could also hurt gold. So that explains the outflow for gold and stock funds.
Prognosis for the second half
“The simple truth is that the second half of the year is likely to be characterized by slow growth [interest] Interest rates,” wrote BofA strategists in a comment. “The risk of a credit shock remains high,” he said.
In equities, “the bear market ends with a recession or an event that prompts the Fed to reverse policy,” the strategists wrote. “We say the bear market is on summer break,” with a range of 3,800 to 4,200 for the S&P 500. The S&P 500 closed at 3,899 on July 8th.
“Wear [market] The end is not over yet and the Big Low has not yet been reached,” say the strategists.
On the raw material front “nominal” [or inflation-unadjusted] US GDP remains very strong, too strong to end the commodity bull market,” the strategists said. Unless, of course, Russia decides to end hostilities in Ukraine.
The S&P GSCI Commodity Index is up 24% so far.