(Bloomberg) - Investors are dismissing the risks that a full-fledged trade war would pose to stocks as “monster” flows of capital keep pouring into global equity markets, Bank of America Corp.’s Michael Hartnett said.
The fact that inflows into stocks have reached a year-to-date peak and that indexes in Germany and China — two top exporters to the US — have rallied since the election of Donald Trump suggests investors are skeptical that US tariffs will cause a recession.
“Global investors are not anywhere close to short US or global equities,” Hartnett wrote in a note.
Global stock funds recorded about $43.4 billion in inflows in the week through Wednesday, the largest amount this year, according to the note from BofA citing EPFR Global data.
Harnett and his team note that sentiment is starting to reflect the US plan to implement reciprocal duties on April 2: Small business optimism in Canada plunged to record lows, for example, with US tariffs set to jump. They add that bonds and gold would prove “way less” vulnerable to a “tariff pandemic” than US and International stocks.
The S&P 500 last week fell into a correction — a 10% drop from its record — on fresh recession concerns. A decline Friday could push the benchmark to a fifth straight weekly decline.
The benchmark, with a 3.7% decline this year, is underperforming European indexes such as Germany’s DAX, which has rallied about 14%.
By Julien Ponthus and Michael Msika
With assistance from Jan-Patrick Barnert
