‘Monster Equity Inflows Say No One Really Believes Trade War,’ Bank Of America’s Hartnett Says – iShares MSCI Germany Index Fund (ARCA:EWG), iShares China Large-Cap ETF (ARCA:FXI)

Bulls are storming back into markets with near-record inflows into stocks and gold, brushing aside concerns that trade tariffs could unleash an economic recession and a bear market on Wall Street.

In a note shared Friday, Bank of America’s chief investment strategist Michael Hartnett said U.S. stocks recorded their biggest weekly inflow of the year, witnessing $34.1 billion of net capital last week.

“Monster equity inflows say no one really believes trade war = recession/bear market,” Hartnett wrote.

Why April 2 Matters For Markets

Hartnett playfully dubbed Apr. 2—the day “reciprocal tariffs” take effect—as a potential “peak fear” moment but suggested market direction might hinge more on “whom [Trump] is playing golf with on Apr. 1.”

Yet, with U.S. tariffs poised to surge from 2–3% to over 10%, bonds and gold appear far less exposed to a potential “tariff pandemic” than U.S. and international equities.

In other words, according to Hartnett, short-term trade-related turbulence can still make gold and bonds safer plays for now.

The SPDR Gold Trust GLD has posted gains in eleven of the past twelve weeks.

From COVID Crash To Now: A Five-Year Astonishing Surge

This week also marked the fifth anniversary of the S&P 500’s COVID low at 2,222 points. Since then, the index has gained more than 150%, powered by an era of rapid fiscal expansion and resilient corporate earnings.

Over the same stretch, U.S. nominal GDP has risen by 50%, government spending surged by 65%, and inflation has hit both Wall Street and Main Street. Yet U.S. Treasuries are down about 50% from their pandemic-era highs.

Foreigners Sell US Equities, Rotate Back To Europe, China

Appetite for equities outside the U.S. is accelerating. Last week, European stocks drew in $4.3 billion, the largest inflow since May 2017 and the fourth biggest ever.

Chinese and German stocks – as tracked by the iShares China Large-Cap ETF FXI and the iShares MSCI Germany Index Fund EWG, respectively – are both up more than 20% since the U.S. election, reinforcing Hartnett’s claim that investors are downplaying the trade war.

The resurgence in European equities comes amid collapsing sentiment elsewhere. Hartnett flagged the second-biggest drop in global growth expectations ever and the biggest decline in U.S. equity allocation on record.

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