One week after BofA's bearish CIO - a lone voice at a bank where all the (formerly bearish) strategists turned uber-bullish just as the market meltup hit 2023 highs - Michael Hartnett explained why the "higher" (and longer) rates remain, the harder the eventual fall, and why the endgame would be interest rates jumping during the next recession instead of dropping, as markets discount what would be a terminal fiscal policy panic, he is back with his latest weekly flow show which covers a lot of ground including his extended thoughts on "higher for longer", and also looks at the latest fund flow divergence which has seen over $1 trillion allocated to money market funds (i.e., cash), in what is the clearest "money on the sidelines" expression yet of investor doubt in a happy ending... the only question is whether said money will eventually be allocated to bonds, stocks or stay in cash.
Starting with Hartnett's weekly "price is right" observation, the fund flows expert looks at the latest weekly moves ($28.9bn to cash, $25.3bn to stocks, $4.8bn to bonds, $0.6bn from gold), and observes the "bear market in conviction" as represented by the $1 trillion in money market inflows in 2023 - and on course for a record $1.5 trillion in annualized inflows - money which "goes to bonds in hard landing, stocks & credit in soft landing, stays in cash & goes to commodities in no landing." All that matters is what "landing" (if any) we eventually get.
