Bank of America warns that a "risk-off summer" is approaching, with market funds shifting to cyclical stocks.

Glonghui June 29｜Bank of America’s chief equity strategist Michael Hartnett pointed out that U.S. equity funds saw outflows of $850 million last week, almost completely offsetting the previous week’s net inflows of $11.9 billion. This reflects worsening market sentiment, with the weakening momentum of the "Magnificent Seven" being a key signal. This may herald a forthcoming "risk-off summer," especially if the yield curve inverts again and declines in technology stocks intensify, potentially further cooling market risk appetite. Hartnett believes that capital is rotating out of large-cap AI-weighted stocks into cyclical stocks. Investors anticipate that if a Trump administration shifts its policy focus from foreign affairs to domestic livelihood and cost-of-living issues—topics favorable for the November midterm elections—related beneficiary sectors could attract more inflows. Semiconductors are seen as one potential beneficiary sector. Regarding the recent simultaneous weakness in safe-haven assets, the U.S. dollar, gold, silver, Bitcoin, and emerging market assets, Hartnett believes the dollar is now an asset that can only be "rented short-term, not held long-term," meaning it is suitable for short-term trading to capture cyclical gains but is not a good long-term holding.