LONDON (Reuters) – BofA recommended selling equities due to “frothy prices” after its weekly fund flow data on Friday showed investors were storming into money markets and gold funds as stock market exuberance faded slightly.
BofA said the 2020 flow trends of “buy everything” had trickled into 2021, but it expects a slowdown in risk assets as “policy, positioning and profits” peak around the first quarter.
“Sell the Vaccine: frothy prices, greedy positioning, inflationary and desperate policy makers, peaky China and consumer all ultimately toxic brew in 2021,” Michael Hartnett, BofA’s chief investment strategist, said.
In the week to Wednesday, cash funds saw $29.1 billion inflows and gold attracted $1.5 billion, marking the largest inflow since August, the U.S. investment bank said.
Global equity funds saw $11.2 billion inflows, mainly driven by U.S. investors, who pulled $1.6 billion from emerging market equities in the first such outflow in 16 weeks.
Noting the “violent” inflationary price action boosting bitcoin in the last two months, the bank said the world’s popular cryptocurrency “blows-the-doors-off prior bubbles”, such as the dotcom boom of the late 1990s, China in the 2000s and gold in the 1970s.
Bitcoin hit $40,000 on Thursday, doubling in value in less than a month, and it has rallied more than 900% since a low in March. It topped $30,000 for the first time on Jan. 2, after surpassing $20,000 on Dec. 16.
Graphic: Bubbly bitcoin
Reporting by Thyagaraju Adinarayan; Editing by Dhara Ranasinghe and Alexander Smith
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