Investing.com -- U.S. stocks recorded their first back-to-back weekly outflows in 10 months, with $700 million redeemed from equities in the week through Feb. 12, according to a Bank of America (BofA) note citing EPFR Global data.
European equity funds saw their largest weekly inflow since January 2023 at $2.5 billion, while tech funds faced the second-largest outflow on record at $4.1 billion. Materials led sector inflows with $800 million.
BofA strategist Michael Hartnett reiterated his preference for international stocks in 2025, emphasizing that “no one [is] positioned” for the outperformance of equities outside the US.
Hartnett highlighted that China’s outperformance could continue due to easing fiscal, monetary, and regulatory policies aimed at boosting domestic demand and addressing the country’s low consumption share of GDP.
He also pointed out that China remains competitive in the AI race, producing affordable AI solutions to support its economy while challenging the “US exceptionalism consensus that AI race [is] won solely by US big tech monopolies.”
Hartnett also mentioned that fears of an escalated US-China tech war are overblown, given the mutual economic dependencies between the two nations.
Meanwhile, the upcoming German election could test short-term rallies tied to a potential Ukraine peace deal, Hartnett added.
The strategists see the election as a key catalyst for European markets. Two of three likely outcomes could bring fiscal stimulus, BofA notes, including a CDU/SPD coalition with a “fiscal bazooka” or a multi-party coalition with one-off stimulus in 2025.
A win by far-right/left parties would likely mean no stimulus and policy gridlock, BofA’s team added.
Gold funds attracted $2 billion in the past week, marking the sixth-largest inflow in four years, as investors sought protection from policy uncertainty. In the meantime, U.S. equity funds experienced a $100 million outflow, their first in seven weeks.
In fixed income, investment-grade bonds saw $7.7 billion in inflows, while high-yield bonds attracted $400 million. Emerging-market debt recorded $100 million in outflows, resuming a trend seen in previous weeks.