Bank of America warns $14.2 billion outflow from U.S. stocks in three weeks may intensify market volatility

Bank of America strategists have stated that capital outflows from US stocks are paving the way for increased volatility, while the market and policymakers remain complacent about rising US Treasury yields. Citing EPFR Global data, Bank of America reports that US equity funds saw outflows of $1.42 billion over the past three weeks, marking the largest outflow since January. Global capital inflows are also slowing down, with global equity funds averaging weekly inflows of $700 million during the same period, far below July’s $5.2 billion. This indicates that investors are becoming more cautious, but there are no signs of panic yet, even as oil prices break above $100 per barrel and diesel prices hit record highs, with the Federal Reserve still discussing data-dependent rate hikes. Strategists including Hartnett noted: “When policymakers start to panic, the market stops panicking, but despite 30-year yields hitting their highest since June 2007 and commodity prices surging, there are no signs of panic.” However, a complacent market and bluffing policies are described as a “recipe for heightened volatility.” The Bank of America team warns that despite $1.5 trillion being invested in AI over the past three years, there is little evidence of productivity improvement across the broader economy. In fact, total factor productivity is falling below its trend line, and this indicator has been highly correlated with consumer confidence over the past 50 years.