Where is the world’s smartest money moving to now?

Written by: Bu Shuqing

Fund flow data show that global investors are going through a profound reshuffling of assets.

According to the Tracker Trading Desk, Bank of America’s latest edition of its The Flow Show reveals that against the backdrop of rising expectations for Fed rate hikes and sustained increases in long-end yields, “smart money” is accelerating into emerging markets, tech stocks, and commodities, while remaining cautious about US domestic equities and UK equities.

For the week ending July 22, global equity funds recorded a net inflow of $30.4 billion for the week, bond funds recorded a net inflow of $14.9 billion, gold funds recorded a net inflow of $2.0 billion, and money market funds recorded a net outflow of $33.9 billion.

Among them, emerging-market equities recorded a net inflow of $29.6 billion for the week, the second-largest weekly inflow ever; China equities recorded a net inflow of $21.3 billion, setting a record for the third-largest weekly inflow ever; and South Korea equities recorded a cumulative net inflow of $16.3 billion over the past four weeks, also hitting a historical record.

Meanwhile, Bank of America’s Bull & Bear Indicator remains in an extremely optimistic zone at 9.6, and the sell signal has remained continuously effective since it was triggered in May 2026. Bank of America strategist Michael Hartnett warned that strong tech-stock fund inflows are being hedged against by hedge-fund positioning that is becoming increasingly bearish in areas such as oil prices, 2-year US Treasuries, VIX, and other directions—pushing market sentiment to historical highs. Investors should be alert to potential triggers for deleveraging in risk assets.

Emerging markets are the biggest winners; China- and South Korea-linked flows break records

Emerging markets are becoming the biggest beneficiary of this round of global capital reshuffling.

Data show that emerging-market equity funds recorded a net inflow of $29.6 billion for the week, the second-highest weekly figure ever; they have continued to post net inflows for the past three weeks.

China equity funds recorded a net inflow of $21.3 billion for the week, the third-largest weekly inflow in history. South Korea equity funds recorded a net inflow of $1.5 billion for the week and a cumulative net inflow of $16.3 billion over the past four weeks, setting a new historical record. Looking at cross-asset returns year-to-date, South Korea equities lead global stock markets with a gain of 79.6%.

In the report, Bank of America lists Hong Kong real-estate stocks as a “long-term buying opportunity,” noting that the Hang Seng Hong Kong Properties Index is currently priced about the same as 30 years ago, leaving limited downside. It added that with China’s financial environment moving toward stability, Asia’s technology sector rising over the long term, and the arrival of a new bull cycle in emerging markets and real estate, this segment could see a significant rally in the second half of the 2020s.

Bank of America said it will buy any pullbacks that are triggered by the Fed tightening policy or by currency crises at the Bank of Japan.

Tech-stock flows hit records, but warning signals are already flashing

Tech stocks remain a core direction being pursued by institutional capital.

Over the past four weeks, tech-stock funds have accumulated net inflows of $52.8 billion, setting a historical record; net inflow for that single week was $4.0 billion. Financial-sector funds recorded a net inflow of $1.5 billion for that week and accumulated net inflows of $8.8 billion over the past four weeks, the largest four-week inflow since January 2022.

However, Bank of America also issued warnings.

The report points out that the leading indicator for the industrial cycle—the “blue-collar semiconductor” index—has fallen 21% from its June peak, posing a challenge to the market’s widely held “boom in economic conditions” narrative. At the same time, the MAGS ETF representing the “Magnificent Seven” is struggling to hold the 200-day moving average (support at $65).

Bank of America strategists suggest that, if the “prosperity” outlook reverses, the best trading strategy is to go long defensive sectors, high-dividend stocks, and duration assets, while shorting bank stocks (currently recording large-scale inflows), brokerage stocks, tech stocks, and industrial stocks—where investors are overweight in industrial stocks at the highest level since July 2021.

Undercurrents in the bond market are building; long-end yields are the biggest variable

The bond market is sending signals that cannot be ignored. The yield on the 30-year US Treasury has risen to 5.2%, the highest since June 2007; the 30-year real yield has reached 3%, the highest since November 2008; and prices of US technology corporate bonds have fallen to two-year lows.

Even so, capital continues to flow into the fixed-income market. Investment-grade bond funds have recorded net inflows for 16 straight weeks, with net inflows of $5.9 billion that week; government and Treasury funds have recorded net inflows for four consecutive weeks, with net inflows of $5.7 billion that week; and inflation-protected bonds (TIPS) have recorded net inflows for 25 straight weeks.

Bank of America’s report notes that, so far in 2026, global central banks have cumulatively raised rates 23 times, and Bank of America expects another 18 rate hikes within the year.

The market-implied probability of a Fed rate hike at the July 29 FOMC meeting has risen to 38%, while the September 16 meeting has fully priced in one rate hike. The report believes that the impact of tighter financial conditions on markets has exceeded the effect of corporate earnings. The sustained rise in long-end yields is a potential trigger for deleveraging in risk assets, and going long the US dollar is the best tool to hedge against the Fed’s hawkish stance.

Gold and crypto quietly form a bottom; commodities lead the way for the year

In alternative assets, gold and cryptocurrencies are quietly accumulating capital. Gold funds recorded a net inflow of $2.0 billion for the week, the largest weekly inflow since April 2026; crypto funds recorded a net inflow of $0.9 billion, the largest weekly inflow in 11 weeks.

Looking at year-to-date asset return rankings, commodities lead all major asset categories with a gain of 57.7%; Brent crude is up 54.6%, WTI crude is up 51.2%, and copper is up 10.9%. By comparison, gold is down 4.4% year-to-date and Bitcoin is down 24.8%.

In its report, Bank of America characterizes the current trend in gold and Bitcoin as “building a base in 2026,” and provides explanations from a macro structural perspective: the US government still maintains a fiscal deficit of roughly $2 trillion, paying about $1 trillion in interest each year, even though tariff revenue has reached $250 billion over the past 12 months. At the same time, increased equity supply (fewer buybacks by companies with negative free cash flow) and expanded bond supply together form a long-term support logic for gold and Bitcoin.

The report believes that in the second half of the 2020s, bank stocks (BKX), which represent “Main Street,” will outperform brokerage stocks and private equity stocks representing “Wall Street.”

Private clients quietly shift to defense; cash falls to a historical low

The asset allocation moves by Bank of America’s private clients are also worth attention.

Based on the latest data, Bank of America’s private clients manage $4.5 trillion in assets, of which stocks account for 65.6%, bonds account for 17.5%, and cash accounts for 9.6%—meaning the cash ratio has fallen to a historical low last seen in May 2026.

From ETF fund flow trends over the past four weeks, private clients are buying defensive assets such as municipal bonds, staples, and healthcare, while selling materials, low-volatility factors, and Japanese equities. This allocation shift sharply diverges from the direction of institutional capital pouring into tech stocks and emerging markets, reflecting differences in risk appetite among different types of investors under the current market environment.

Bank of America’s Bull & Bear Indicator breakdown shows that hedge-fund positioning is at the 82nd percentile (extremely optimistic), equity fund flows are at the 96th percentile (extremely optimistic), and fund manager survey positioning is at the 100th percentile (extremely optimistic). Bank of America said that since 2002, a total of 17 sell signals have been triggered. After these triggers, the ACWI Index has averaged a decline of 2% to 3% over the following 2 to 3 months, with the maximum drawdown reaching 15% to 20%. The signal accuracy is about 60%.