Where is smart money going now?

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Capital flow data shows that global investors are undergoing a profound asset reallocation.

According to Wind Chasing Trading Desk, Bank of America’s latest “The Flow Show” report reveals that amid rising expectations for Fed rate hikes and persistently high long-term yields, smart money is accelerating into emerging markets, technology stocks, and commodities, while remaining cautious on US and UK equities.

For the week ending July 22, global equity funds saw a single-week net inflow of $30.4 billion, bond funds net inflow of $14.9 billion, gold funds net inflow of $2 billion, while money market funds had a net outflow of $33.9 billion.

Among them, emerging market equities saw a single-week net inflow of $29.6 billion, the second largest in history; Chinese equities had a net inflow of $21.3 billion, the third largest weekly inflow on record; South Korean equities saw a cumulative net inflow of $16.3 billion over the past four weeks, also a new record.

Meanwhile, the Bank of America Bull & Bear Indicator remains at an extremely optimistic range of 9.6, with the sell signal triggered since May 2026 still in effect. BofA strategist Michael Hartnett warns that strong tech inflows have been countered by hedge funds taking increasingly bearish positions in oil, 2-year US Treasuries, and the VIX. Market sentiment is at historic highs, so investors must be wary of potential deleveraging triggers for risk assets.

Emerging Markets the Biggest Winner, Record Inflows into China and Korea

Emerging markets have become the biggest beneficiaries in this round of global capital reallocation.

Data show that emerging market equity funds had a weekly net inflow of $29.6 billion, the second highest ever, marking three consecutive weeks of inflows.

Chinese equity funds saw a weekly net inflow of $21.3 billion, the third largest in history. South Korean equity funds had a weekly net inflow of $1.5 billion, with a cumulative $16.3 billion over the past four weeks, reaching a new record. From a cross-asset return ranking so far this year, Korean equities rank at the top of the world’s stock markets with a gain of 79.6%.

BofA strategists listed Hong Kong property stocks as a “long-term buying opportunity” in the report, pointing out that the Hang Seng Hong Kong Property Index is currently at price levels equivalent to 30 years ago, with limited downside. As China’s financial environment stabilizes, and the Asian tech sector rises over the long term, coupled with a new bull cycle in emerging markets and real estate, the sector is expected to see significant gains in the second half of the 2020s.

BofA says they will be buyers on any dips caused by Fed tightening or a yen crisis triggered by the Bank of Japan.

Tech Stocks Set Inflow Records, But Warning Signals Flashing

Tech stocks remain the core target for institutional capital.

Over the past four weeks, tech equity funds saw a cumulative net inflow of $52.8 billion, setting a record; weekly net inflow reached $4 billion. Financial stock funds had a weekly net inflow of $1.5 billion and a four-week cumulative inflow of $8.8 billion, the largest since January 2022.

However, BofA also issued a warning.

The report points out that the leading indicator of the industrial cycle—“Blue-collar Semiconductor” Index—has fallen 21% from its June peak, challenging the market’s commonly held “boom” narrative. Meanwhile, the MAGS ETF, representing the “Big Seven Techs,” is struggling to hold its 200-day moving average support at $65.

BofA strategists suggest that, if the “boom” expectation reverses, the best trading strategy would be to go long defensive sectors, high-dividend stocks, and duration assets, and go short bank stocks (which are currently seeing large inflows), brokerage stocks, tech stocks, and industrials—among which investors’ overweight in industrials is at the highest level since July 2021.

Undercurrents in the Bond Market, Long-Term Yields the Biggest Variable

The bond market is sending signals that cannot be ignored. The 30-year US Treasury yield rose to 5.2%, the highest since June 2007; the 30-year real yield has reached 3%, the highest since November 2008; US tech company bond prices have dropped to a two-year low.

Nevertheless, inflows into fixed-income continue. Investment grade bond funds have posted net inflows for 16 consecutive weeks, with a weekly inflow of $5.9 billion; government and Treasury funds have posted net inflows for four straight weeks, with $5.7 billion this week; inflation-protected securities (TIPS) have had 25 consecutive weeks of net inflows.

The BofA report pointed out that since 2026, global central banks have hiked rates 23 times, and BofA expects another 18 hikes this year.

The market-implied probability of a Fed hike at the July 29 FOMC meeting has risen to 38%, with a full hike priced in for the September 16 meeting. The report contends that tightening financial conditions have had more market impact than corporate earnings, long-end yields are the key trigger for potential risk asset deleveraging, and going long the US dollar is the best hedge against a hawkish Fed stance.

Gold & Crypto Quietly Base, Commodities Lead for the Year

In the alternative asset space, gold and crypto are quietly accumulating capital. Gold funds had a weekly net inflow of $2 billion, the most since April 2026; crypto funds saw a net inflow of $900 million, the largest in 11 weeks.

From year-to-date asset return rankings, commodities top major asset classes with a 57.7% gain: Brent oil is up 54.6%, WTI crude is up 51.2%, and copper up 10.9%. In contrast, gold is down 4.4% YTD, Bitcoin down 24.8%.

BofA’s report characterizes the current trend of gold and Bitcoin as “2026 bottoming,” offering a macro explanation: the US government still maintains a fiscal deficit of around $2 trillion, pays about $1 trillion in interest each year, and, despite tariffs generating $250 billion over the past 12 months, stock supply is rising (as companies with negative free cash flow buy back less), and bond supply is growing, providing long-term support for both gold and Bitcoin.

The report suggests that in the second half of the 2020s, “Main Street” bank stocks (BKX) will outperform “Wall Street” brokers and private equity.

Private Clients Quietly Pivot Defensive, Cash at Historic Lows

Bank of America private client allocation trends are also noteworthy.

According to the latest data, BofA private client assets under management total $4.5 trillion, with equities at 65.6%, bonds at 17.5%, and cash at 9.6%—the lowest cash level since May 2026.

ETF flows over the past four weeks show that private clients are buying defensives like municipal bonds, consumer staples, and healthcare, and selling materials, low-volatility factors, and Japanese equities. This allocation shift diverges from the institutional rush into tech and emerging markets, reflecting differing risk appetites among investor types in the current environment.

BofA’s Bull & Bear Indicator sub-indices show hedge fund positioning at the 82nd percentile (extremely optimistic), equity flows at the 96th percentile (extremely optimistic), and fund manager survey positioning at the 100th percentile (extremely optimistic). BofA notes that since 2002, 17 sell signals have been triggered; after each, the ACWI index fell an average of 2–3% over the next 2–3 months, with maximum drawdowns of 15–20%, and an accuracy rate of about 60%.

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