Fund flow data reveals that global investors are undergoing a profound asset reallocation.
According to the latest "Flow Show" report from Bank of America, as expectations for a Federal Reserve rate hike rise and long-end yields continue to climb, smart money is accelerating its concentration into emerging markets, technology stocks, and commodities, while maintaining a cautious stance on US and UK equities.
For the week ending July 22, global equity funds saw net inflows of $30.4 billion, bond funds attracted $14.9 billion, gold funds drew in $2 billion, while money market funds experienced net outflows of $33.9 billion.
Within this, emerging market equities recorded net inflows of $29.6 billion, marking the second-largest weekly inflow on record. Chinese equities saw net inflows of $21.3 billion, the third-largest weekly inflow in history. South Korean equities accumulated net inflows of $16.3 billion over the past four weeks, also setting a new historical record.
Meanwhile, Bank of America's Bull & Bear Indicator remains in the highly optimistic territory at 9.6, with a sell signal that has been active since May 2026. Strategist Michael Hartnett warns that strong inflows into technology stocks are being hedged by increasingly bearish positions from hedge funds in areas like oil, 2-year Treasuries, and the VIX. Market sentiment is at historic highs, and investors should be cautious about potential triggers for a deleveraging in risk assets.
Emerging Markets Emerge as Biggest Winners, Chinese and Korean Inflows Break Records
Emerging markets are becoming the primary beneficiary of this global capital reallocation.
Data shows emerging market equity funds had net weekly inflows of $29.6 billion, the second-highest on record, with consistent inflows over the past three weeks.
Chinese equity funds recorded net weekly inflows of $21.3 billion, the third-largest single-week inflow in history. South Korean equity funds saw $1.5 billion in weekly inflows, accumulating $16.3 billion over the past four weeks to refresh the historical record. In year-to-date cross-asset return rankings, South Korean equities lead global stock markets with a 79.6% gain.
In the report, Bank of America strategists have listed Hong Kong real estate stocks as a "long-term buying opportunity," noting that the Hang Seng Hong Kong Property Index is currently at price levels similar to 30 years ago, with limited downside. They suggest that as China's financial environment stabilizes, Asia's tech sector rises over the long term, and a new bull market emerges in emerging markets and real estate, this sector could see significant gains in the latter half of the 2020s.
Bank of America states it will buy any dips triggered by Fed tightening or a Japanese yen crisis on a pullback.
Tech Stock Inflows Hit Record, But Warning Signs Flash
Technology stocks remain the core focus for institutional capital.
Over the past four weeks, tech stock funds accumulated net inflows of $52.8 billion, a historical record, with $4 billion flowing in during the latest week. Financial sector funds saw $1.5 billion in weekly inflows, accumulating $8.8 billion over the past four weeks, the largest four-week inflow since January 2022.
However, Bank of America also issues a warning.
The report points out that the "blue-collar semiconductor" index, a leading indicator for the industrial cycle, has fallen 21% from its June high, challenging the market's prevailing narrative of an "economic boom." Meanwhile, the MAGS ETF, representing the "Magnificent Seven," is struggling to hold its 200-day moving average support at $65.
Bank of America strategists suggest that in the event of a reversal in "boom" expectations, the best trading strategy is to go long on defensive sectors, high-dividend stocks, and duration assets, while shorting bank stocks (currently seeing large inflows), brokerages, tech stocks, and industrial stocks—where investor overweight positions have reached their highest level since July 2021.
Bond Market Ripples with Long-End Yields as Key Variable
The bond market is sending signals that cannot be ignored. The 30-year US Treasury yield has risen to 5.2%, the highest since June 2007. The 30-year real yield reached 3%, the highest since November 2008. Prices of US tech company bonds have fallen to two-year lows.
Despite this, funds continue to flow into fixed-income markets. Investment-grade bond funds have recorded net inflows for 16 consecutive weeks, with $5.9 billion in the latest week. Government and Treasury bond funds have seen inflows for four consecutive weeks, with $5.7 billion in the latest week. TIPS funds have had net inflows for 25 consecutive weeks.
Bank of America's report indicates that global central banks have cumulatively raised rates 23 times so far in 2026, and it expects an additional 18 rate hikes within the year.
The market's implied probability for a Fed rate hike at the July 29 FOMC meeting has risen to 38%, while a rate hike is fully priced in for the September 16 meeting. The report argues that the impact of tightening financial conditions on the market has exceeded the impact of corporate earnings. The persistent rise in long-end yields is a potential trigger for deleveraging in risk assets, and going long on the US dollar is the best hedge against a hawkish Fed.
Gold and Cryptocurrencies Quietly Bottoming, Commodities Lead the Year
In alternative assets, gold and cryptocurrencies are quietly accumulating funds. Gold funds saw net inflows of $2 billion in the latest week, the largest single-week inflow since April 2026. Cryptocurrency funds attracted $900 million, the largest weekly inflow in 11 weeks.
In year-to-date asset return rankings, commodities lead all major asset classes with a 57.7% gain. Brent crude oil is up 54.6%, WTI crude oil up 51.2%, and copper up 10.9%. In contrast, gold is down 4.4% year-to-date, and Bitcoin is down 24.8%.
Bank of America characterizes the current movements of gold and Bitcoin as a "2026 bottoming process," explaining it from a macro-structural perspective: The US government maintains a fiscal deficit of approximately $2 trillion, paying about $1 trillion in annual interest, despite tariff revenues reaching $250 billion over the past 12 months. Meanwhile, increased stock supply (companies with negative free cash flow reducing buybacks) and expanding bond supply constitute a long-term supportive logic for gold and Bitcoin.
The report believes that in the latter half of the 2020s, "Main Street" bank stocks (BKX) will outperform "Wall Street" brokerage stocks and private equity.
Private Clients Quietly Shift to Defensive, Cash at Historic Lows
The asset allocation moves of Bank of America's private clients are also noteworthy.
As of the latest data, Bank of America manages $4.5 trillion in private client assets, with equities at 65.6%, bonds at 17.5%, and cash at 9.6%—the cash ratio having fallen to a historic low from May 2026 levels.
Based on ETF flows over the past four weeks, private clients are buying defensive assets like municipal bonds, consumer staples, and healthcare, while selling materials, low-volatility factors, and Japanese equities. This shift in allocation diverges sharply from institutional capital's rush into tech stocks and emerging markets, reflecting the different risk appetites among various investor types in the current market environment.
Sub-component data from Bank of America's Bull & Bear Indicator shows hedge fund positions at the 82nd percentile (extremely bullish), equity fund flows at the 96th percentile (extremely bullish), and fund manager survey positions at the 100th percentile (extremely bullish). Bank of America notes that since 2002, there have been 17 instances of this sell signal being triggered. In these instances, the ACWI Index has averaged a decline of 2% to 3% over the subsequent 2 to 3 months, with a maximum drawdown of 15% to 20%, and the signal has an accuracy rate of about 60%.
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