“Bank of America Strategists Predict Economic Downturn Will Affect Technology Stocks, Triggers Huge Inflows and Outflows”

Investing.com – A prolonged period of economic downturn in the United States will rattle technology stocks as they attract huge inflows of investor money, according to Bank of America (NYSE:) strategists.

At the same time, a report was also issued by the bank showing the outflows and inflows to and from the markets in the period from May 3 to May 10.

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Technology stocks

The bank’s analysts wrote in a note on Friday that a team led by Michael Hartnett expects a recession to disrupt technology stocks just as it did in 2008.

Bank of America, citing EPFR Global data, said investors pumped $3.8 billion into technology stocks in the week from May 3 to May 10, the largest inflow since December 2021. On the other hand, $2.1 billion was withdrawn from financial stocks, the largest outflow. Since May 2022, amid unrest between regional banks in the United States.

Technology stocks have risen 22% this year as investors expect the Federal Reserve to soon begin easing monetary policy, relieving pressure on the interest rate-sensitive sector. And while sector earnings are set to extend their decline from last year, investors are already expecting a recovery in 2024.

Hartnett, who correctly predicted last year that recession fears would fuel stock exodus, warned that the US central bank was unlikely to stop raising rates amid rising inflation as well as low unemployment.

He also said negative jobs data would be a buy signal for cyclical stocks linked to the economy – such as technology stocks – in 2023. The labor market was resilient in the US, as gains in hiring and worker wages accelerated in April.

flow directions

Among the other notable flows in the latest week, the pace of inflows to cash is slowing, with $13.8 billion entering the asset class. Meanwhile, it saw its biggest inflow in six weeks at $6.3 billion. The US and European equity funds each had outflows of $2.7 billion and $2.2 billion, respectively.

While funds witnessed an inflow of $1.3 billion, the largest since April 2022.

The Bank of America Bears and Bulls Index rose to 3.4, in the neutral range, up from 3.2 last week.

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