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The
bank's "Bull & Bear" gauge of market sentiment has dropped to
1.3, down from 2.4 a week ago, triggering a "buy signal" for
risk assets, the bank's strategists said.
The bank said it is more bullish this year on stocks and
commodities after huge outflows of investor cash from those
markets and also because central banks were loosening monetary
policy in response.
"Trade war thus far caused lower rates, not recession," the
strategists, led by Michael Hartnett, said in the report.
The call comes as investors continue to sell equities and buy
bonds and gold, which are considered safe during times of
economic and political strife, amid worries over trade tensions
and a global economic slowdown.
Some $12.4 billion of cash flowed into bond funds and $1.9
billion into gold in the week to Wednesday, the bank said,
citing EPFR data. Another $7.6 billion left equities, taking the
year-to-date outflow total to $204 billion, it said.
A record $160 billion of inflows into bond funds over the past
three months reveals deep global recession fears, the
strategists said. They said Europe looks increasingly like
Japan, which is still struggling with low inflation after the
slump caused by a burst asset bubble in the early 1990s.
Europe's major stocks indices reached one-months highs on
Friday, amid hopes that trade tensions between Washington and
Beijing were easing, although the latest batch of punitive
import tariffs were due to hit Chinese goods on Sunday.
(Graphic: BAML FLOW SHOW link:
https://fingfx.thomsonreuters.
com/gfx/mkt/12/5462/5412/baml.png)
(Reporting by Josephine Mason; editing by Karin Strohecker,
Larry King)
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