BofA Says Investors Poured $508 Billion Into Cash This Quarter

(Bloomberg) -- Investors are piling into cash at their fastest pace since the onset of the pandemic, unnerved by a series of bank runs while seeking out higher interest rates at money-market funds.

During the first quarter, investors poured $508 billion into cash funds in their largest quarterly inflow since the early days of Covid-19 three years ago, according to Bank of America Corp. strategists citing EPFR Global data.

More than $100 billion have flocked into money-market funds in the past two weeks alone, they said.

“Dash for cash continues,” wrote strategists led by Michael Hartnett in a note on Thursday, pointing to $60.1 billion being added to the asset class this week. Meanwhile, equity funds continued to see outflows, with $5.2 billions of redemptions.

Earlier this week, Bank of America said cash is a “compelling alternative” to stocks until the economic outlook stabilizes.

The S&P 500 index has little room for short-term upside given the firm’s year-end price-target of 4,000 — slightly below the benchmark’s Thursday closing price of 4,050.83 — the strategists led by Savita Subramanian said Wednesday. Meanwhile, cash offers returns around 5%.

Cash Stashed in Funds Instead of Banks Fuels US Slump Risks (1)

Bank runs that led to the collapse of Silicon Valley Bank and other smaller lenders, as well as UBS AG’s shock rescue of Credit Suisse Group AG earlier this month, have heightened fears about the state of the banking system and fueled investors’ risk aversion and appetite for liquid assets. Interest rates at 16-year highs have added to the influx into money-market funds and away from traditional deposits.

Assets in US money-market funds have now reached a record $5.2 trillion, according to data from the Investment Company Institute, with more than $300 billion of that added in the three weeks to March 29.

Elsewhere in weekly flows, tech dominated allocations to equities, notching inflows for a sixth straight week to mark the longest winning streak for the sector in nearly a year, BofA strategists said.

Investors have dashed to technology stocks on bets peak rates are near, while viewing high-quality names like Apple Inc., Amazon.com Inc., and Microsoft Corp. as a refuge with bank stresses sending financials into a tailspin this month. The appetite for tech has powered the Nasdaq 100 into a new bull market, with the index closing 20% above its Dec. 28 closing low Wednesday.

Meanwhile, BofA clients pulled $600 million from financials this week, the biggest outflow from the sector in 10 weeks.

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