Funds continue flowing into equities, bonds, and gold; BofA recommends focusing on the “Cs”: curve, China, consumer cyclicals, chips, and commodities

Overview

This is a Bank of America weekly global investment strategy report on fund flows and cross-asset research, focusing on fund flows, positioning changes, and technical indicators across equities, bonds, gold, crypto assets, cash, and commodities. The title phrase “Money does grow on Cs” points to its preferred Q2 trading themes: curve steepeners, China, consumer cyclicals, chips, and commodities.

Core views

The report’s core view is that markets are repricing nominal economic prosperity, a U.S. policy shift toward affordability, easing U.S.-China trade tensions, strategic demand for chips and resources driven by AI competition, and a reheating tech bubble. The authors continue to recommend focusing on curve steepeners, China, consumer cyclicals, chips, and commodities; at the same time, they believe semiconductors are significantly overbought and global equity breadth is approaching a sell threshold, so traders should consider taking profits and preparing for a rebound in volatility.

Analysis framework

The report uses frameworks including fund flows, private client allocation, cross-asset returns, technical breadth indicators, the BofA Bull & Bear Indicator, and the macro linkage between employment and earnings to form a holistic judgment on the heat in risk assets, crowding in flows, and potential turning points.

Methodology notes

• Sentiment and Positioning IndicatorBofA Bull & Bear Indicator

  Assesses market sentiment through multiple indicators such as fund flows, positioning, and market breadth; the current reading is 6.3, signaling neutrality.

  The report notes that the indicator has pulled back from the previous extremely bullish zone of >8.0; if breadth expands further over the next 4 weeks, HY or EM bonds receive large inflows, and FMS cash levels fall below 3.8%, it could trigger a sell signal again.

• Market Breadth RuleBofA Global Breadth Rule

  Buy equities when a net 88% of MSCI ACWI markets are below their 50-day and 200-day moving averages, and sell equities when a net 88% are above those averages.

  Currently, a net 75% of equity indices are overbought; the report believes a sell signal could be triggered if China’s HSCEI breaks above 9000 and India’s SENSEX breaks above 82000.

• Cross-Asset Portfolio25/25/25/25 Permanent Portfolio

  A portfolio composed of 25% each in equities, 10-year U.S. Treasuries, cash, and commodities.

  This portfolio has returned about 26% annualized year to date in 2026, close to one of the best performances since 1933, and has delivered the third-largest excess return over the 60/40 portfolio in a century, supporting the case for allocators to revisit their underweight in commodities.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Gold / Precious Metals

  Related to fund inflows and themes of inflation, volatility, and commodity allocation

  Strengths

  Gold has returned 8.4% year to date, precious metals have seen $0.9bn of inflows for four consecutive weeks, and private clients hold only about 0.4% of AUM in gold, suggesting further allocation room remains.

  Weaknesses

  Gold has posted double-digit returns for consecutive years, and historically similar rallies have often ended alongside rising bond volatility.

  Comparison

  Compared with bitcoin’s -10.6% year-to-date return, gold has performed more steadily; however, it has lagged crude oil and broad commodities.

  Risks

  Rising bond yields, dollar volatility, crowded positioning, and changes in real rates could affect gold performance.

• Commodities / Natural Resources

  The report explicitly recommends that allocators increase their underweight exposure to commodities and proposes to “buy natural resources.”

  Strengths

  Commodities have returned 52.4% year to date, and the strong performance of the 25/25/25/25 portfolio highlights their diversification value.

  Weaknesses

  Prices have already risen sharply and could be affected by easing geopolitical tensions, weakening demand, or profit-taking.

  Comparison

  Commodities have significantly outperformed ACWI, SPX, cash, and bonds.

  Risks

  Falling oil prices, slowing global growth, policy intervention, and reversal of supply shocks.

• Semiconductors / Chips

  The report lists chips as one of its preferred Q2 trades, but also notes that SOX relative to its 200-day moving average is at its most overbought level since June 2000.

  Strengths

  A breakout in semiconductors is viewed as a signal that the U.S. ISM manufacturing PMI could rise above 60, consistent with the cyclical upswing narrative.

  Weaknesses

  Technical conditions are significantly overbought, and short-term positioning is crowded.

  Comparison

  Chips are viewed as a core expression of both cyclical upside and AI resource competition.

  Risks

  A valuation bubble similar to 2000, profit-taking, trade frictions, and changes in expectations for AI capital spending.

• Equities

  Large fund inflows and elevated private client equity allocation, but breadth indicators show overbought conditions.

  Strengths

  Equities saw inflows of $25.9bn this week, with annualized year-to-date inflows of about $1.0tn; U.S. large caps still enjoy strong flow support.

  Weaknesses

  A net 75% of global equity indices are overbought; reaching 88% could trigger a sell signal.

  Comparison

  ACWI is up 8.1% year to date and SPX 3.8%, lagging commodities and crude oil.

  Risks

  Rising yields, pressure on bonds from strong employment, policy uncertainty, tech bubble risk, and a market breadth sell signal.

• Bonds

  Investment-grade bonds, emerging market bonds, bank loans, and TIPS have seen inflows, but strong U.S. employment could push yields higher.

  Strengths

  Bonds saw inflows of $12.4bn this week, with $3.0bn into investment-grade bonds and $6.6bn into emerging market bonds.

  Weaknesses

  If U.S. nonfarm payrolls continue to exceed 150k/month, it could push GT2 above 4% and GT30 above 5%.

  Comparison

  Government bonds are down 0.4% year to date, underperforming cash, equities, and gold.

  Risks

  Higher yields early in the new Fed chair’s term, sticky inflation, and fiscal supply pressure.

Key data

• Weekly equity fund flow$25.9bn inflowAnnualized inflows year to date are about $1.0tn, close to record levels.
• Weekly bond fund flow$12.4bn inflowInvestment-grade bonds saw inflows of $3.0bn this week, with annualized year-to-date inflows of about $434bn.
• Weekly gold fund flow$0.9bn inflowPrecious metals have posted inflows for the fourth consecutive week.
• Weekly cash fund flow$19.8bn outflowCash outflows alongside inflows into equities, bonds, gold, and crypto assets show that risk appetite remains strong.
• BofA private client allocationEquities 65.1%, bonds 17.6%, cash 10.0%Equity allocation is the highest since December 2021, while cash allocation is the lowest since September 2018.
• BofA Bull & Bear Indicator6.3The current signal is neutral.
• Global equity breadthA net 75% of indices are in overbought territoryIf it reaches a net 88% overbought, it could trigger a BofA Global Breadth Rule sell signal.
• 25/25/25/25 portfolio performanceAbout 26% return year to date in 2026Tracking one of the best years since 1933 and significantly outperforming the 60/40 portfolio.
• Year-to-date asset returns in 2026oil 68.6%, commodities 52.4%, gold 8.4%, ACWI 8.1%, SPX 3.8%, bitcoin -10.6%Crude oil and commodities are significantly leading, while gold and global equities have positive returns.

Impact & implications

For investors, the report conveys a combined signal that “pro-cyclical and real assets continue to be supported by flows and narrative, but risk assets are already running hot.” Commodities, gold, chips, China, and consumer cyclicals may continue to benefit from reallocations, AI-driven resource competition, and policy expectations; however, overheated semiconductors, global equity breadth nearing thresholds, and strong employment potentially pushing up U.S. Treasury yields all imply the need to control momentum-chasing risk and monitor a rebound in volatility.

Risks

• Global equity markets are approaching the overbought threshold, which could trigger a BofA Global Breadth Rule sell signal.
• The SOX semiconductor index relative to its 200-day moving average is at its most significantly overbought level since June 2000, creating bubble and pullback risk.
• If U.S. employment data surprises strongly to the upside, it could push U.S. Treasury yields higher, putting pressure on bonds and highly valued equities.
• Historical periods in which gold and equities delivered double-digit returns for consecutive years have typically eventually been accompanied by rising volatility.
• Changes related to U.S.-China trade, the Iran war, oil prices, and U.S. midterm election policies could affect risk appetite.
• The BofA indicator includes backtested and model-based components and should not be regarded as a guarantee of actual performance for any financial instrument or portfolio.

What to watch

• Whether the BofA Bull & Bear Indicator rises back toward the >8.0 sell-signal zone over the next 4 weeks.
• Whether large inflows emerge of around $10bn into high-yield bonds or around $8bn into emerging market bonds.
• Whether FMS cash levels fall below 3.8%.
• Whether China’s HSCEI breaks above 9000 and India’s SENSEX breaks above 82000, thereby pushing a global breadth sell signal.
• Whether U.S. nonfarm payrolls continue to exceed 150k/month, and whether GT2 rises above 4% and GT30 above 5%.
• Whether oil and gasoline prices decline, and whether U.S.-China trade tensions ease in May.
• Whether private clients continue increasing exposure to equities, energy, high dividend, and industrials through ETFs.