Technology-focused funds suffered an unprecedented weekly exodus of $9.3 billion in the seven days ending June 24, a sharp reversal from the prior week's record $19.2 billion inflow, according to Bank of America. The bank's strategists said the movement reflects investors stepping away from the largest AI-focused names and redeploying capital into smaller, more rate-sensitive areas of the market.
Bank of America analyst Michael Hartnett - and his team - described the flow shift as liquidity pulling out of the mega-cap AI "arms racers" and rotating toward semiconductors and less liquid cyclicals. The categories attracting interest include small- and mid-cap equities, housing-related securities and real estate investment trusts, as investors prepare for anticipated consumer affordability measures tied to political developments.
Despite the rotation within equity market segments, Hartnett noted that the S&P 500 is still supported by operating margins running at 16%, a backdrop he said continues to broadly favor equities even as money departs the largest tech names.
On the macro front, the team at Bank of America identified three discrete market events that would likely mark the onset of a "proper risk-off summer": the Magnificent Seven ETF (MAGS) trading under $60, the AUD/JPY currency cross slipping below 110, and a fresh inversion of the yield curve. Each of those thresholds was presented as a clear trigger rather than a forecast.
With respect to currency positioning, Hartnett's group maintained a wary stance toward the U.S. dollar, describing it as a "rent" rather than an "own" asset. They also flagged gold's recent decline beneath the $4,000 level as an attractive entry point for investors with a longer-term horizon, implying that the metal's pullback represents opportunity.
On allocation preferences, the strategists reiterated a secular tilt toward emerging markets over U.S. equities, while highlighting fixed-income moves since a leadership change at the Federal Reserve. Since Kevin Warsh assumed the role of Fed chair on May 22, U.S. Treasuries have risen 3.2% while U.S. stocks have fallen 1.6%. Hartnett said that pattern mirrors several prior Fed chair tenures that were associated with declining bond yields and suggested that being long the long end of the yield curve constitutes the most contrarian secular trade in markets.
Bank of America's Bull & Bear indicator edged down to 9.1 from 9.2, a decline the firm attributed to the equity outflows and widening spreads in high-yield and AT1 debt. The sell signal, which was first triggered in May, has historically corresponded with average global equity declines of 2-3% over two to three months, and maximum drawdowns of 15-20%, according to the team's review of past episodes.
Other flow data detailed by the bank included continued demand for bonds, which attracted $16.6 billion, marking the 61st straight week of inflows. Cash experienced an outflow of $25.5 billion, the largest cash withdrawal in eight weeks. U.S. equities recorded an $8.5 billion outflow, the first in 13 weeks and following the prior week's record $119.2 billion inflow.
The bank also highlighted sector-specific flows: real estate funds drew $900 million, the biggest weekly inflow for the sector since March 2024; infrastructure pulled in $1.5 billion, the largest inflow in six weeks; and energy funds saw $1.5 billion in outflows, the most significant weekly redemptions since April 2025.
What this means
- Large-cap AI leaders are experiencing rapid liquidity flight, with funds reallocating into semiconductors, housing, REITs and smaller-cap cyclical names.
- Gold is being positioned as a longer-term entry following a pullback below $4,000, while the dollar is treated with caution by strategists.
- Bond markets have continued to attract capital even as equity flows moderate, and the long end of the Treasury curve is cited as a contrarian secular opportunity.
Flow and sentiment indicators to watch
- MAGS trading under $60 as a potential catalyst for broader risk aversion.
- AUD/JPY dropping below 110 as a currency market signal of stress.
- Yield curve inversion as a classic macro risk-off trigger.