Bank of America: The Fed’s interest rate increase is expected to rise, and funds flow out of traditional risk assets

According to reports, Bank of America data showed that investors became more cautious in the week ending February 15, because a series of data prompted many people to raise their expectations of the rate increase of the Federal Reserve. The weekly capital flow report released by Bank of America Global Research on Friday showed that the largest capital outflow occurred in technology funds since September last year, the largest capital outflow occurred in emerging market bond funds in 14 weeks, and the largest capital outflow occurred in junk bond funds in 8 weeks. The employment, retail sales and inflation data released by the United States this month were stronger than expected, pushing up the market’s expectation of the Fed’s interest rate increase. This is not good news for riskier stocks and emerging market assets. Analysts at Bank of America said that these data meant that “the Fed’s mission is far from complete”.

Interpretation of this information:

Bank of America data reveals that investors have become more cautious as a result of their raised expectations on the Federal Reserve’s rate increase due to a series of data. The report disclosed that there were significant outflows in technology, emerging market bond, and junk bond funds in the week ending on February 15. The market’s expectation of the Fed’s interest rate increase rose due to strong employment, inflation, and retail sales data compiled in the US. This change in investor sentiment is not favorable for emerging market assets and riskier stocks. According to Bank of America’s analysts, these data signify that the Fed’s mission is far from complete.

Investment community – The investment community is sensitive to subtle changes and developments that could affect their investments. The report reveals a shift in investor sentiment as news around data that could influence their investments are being reported.

Data – The market’s expectations and investor sentiment are often driven by data, and in this case, the employment, retail sales, and inflation data released in February played a massive role in shaping investor sentiments.

Federal Reserve Interest Rates – The Federal Reserve Interest Rates are a significant determinant of investor’s decision and market sentiments. The report shows that the market’s projection on the increase of the Fed’s interest rate profoundly affected investors’ decisions and market sentiments.

In summary, Bank of America’s report indicates that investors are increasingly cautious due to increased expectations on the rate increase of the Federal Reserve. This report causes a significant outflow of funds in technology, emerging market bond, and junk bond funds, posing challenges to riskier stocks and emerging market assets. The cause of this shift points to the market’s expectations arising from the strong employment, retail sales, and inflation data released. Given this development, analysts at Bank of America assert that the Fed’s mission is far from complete.