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LONDON, Oct 9 (Reuters)Bond funds have seen the second-largest weekly inflows ever of $25.9 billion, BofA said on Friday, as the market continues to price in a Democrats victory in next month’s U.S. presidential election, which could mean even more fiscal stimulus.

“Blue wave election outcome (Democrats winning) has curiously flipped from consensus bear to bull catalyst in recent months,” the U.S. investment bank said.

Riskier high yield bond funds attracted $5 billion in the week to Oct. 7, the highest in 11 weeks, while government bond funds sucked in $3.8 billion, the largest inflows in 14 weeks.

Equity funds, meanwhile, attracted $4.4 billion, mainly driven by U.S. equities, BofA said, adding it expected the “top” in asset prices to come between U.S. election day on Nov. 3 and the inauguration of the new president in January 2021.

In the fourth quarter, it expects banks, energy and small cap stocks to rally, and 10-year Treasury bond yields to rise to 1%.

The bank also highlighted the likelihood of renewable energy stocks front-running a Democratic victory in presidential and Congressional elections, plus more fiscal stimulus, pointing to one solar energy exchange traded fund’s stellar performance.

Invesco solar ETF TAN.P has soared 255% from its March lows and gained 42% in the last month alone.

“A ‘blue wave’ clean sweep which could see Dems in control of the Oval, Senate and House is seeing money pile into renewables”, a London-based trader said.

(Reporting by Thyagaraju Adinarayan; Editing by Tommy Wilkes and Mark Potter)

((thyagaraju.adinarayan@tr.com; +44 20 7542 7015; Reuters Messaging: thyagaraju.adinarayan.thomsonreuters.com@reuters.net; Twitter @thyagu))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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  • Despite September’s correction in the stock market, the long-term technical setup for further upside is intact heading into the November election, according to Bank of America.
  • Based on a completed “cup and handle” technical analysis pattern, the S&P 500 could rise to 3,700 to 4,300, representing potential upside of 12% to 30% from Friday’s close, BofA said.
  • Encouraging margin debt data suggests that the current market sell-off is a seasonal correction, and not a long-term top, according to BofA.
  • Visit Business Insider’s homepage for more stories.

The September correction in the stock market should be viewed as a seasonal correction, and not as a long-term top, according to Bank of America.

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In a technical analysis note on Monday, BofA said investors should continue to hold on for potential upside in the S&P 500 heading into the November election.

Specifically, a completed “cup and handle” pattern suggests the S&P 500 could rise to 3,700, representing potential upside of 12% from Friday’s close. Additionally, a longer-term target of 4,300 is also derived from the technical analysis pattern, representing 30% upside from Friday’s close.

“SPX 4300 is an aspirational upside count, but one that is achievable based on the bullish breakout, positive backdrop signals and our secular bull market roadmap,” BofA said.

A cup and handle is a bullish continuation pattern that is best defined as a sell-off in a security, followed by a recovery back to the highs seen prior to the sell-off, followed by a mild correction. From there, the security is set to move higher if it breaks above the handle correction level.

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In this case, the highs seen in February, the