Buy Gold, Crypto, and China; Tread Carefully on Rich U.S. Tech: BofA’s Hartnett Advises Investors
August 1, 2025 — Investing.com
Global equity markets recorded robust inflows in the week leading up to July 30, with investors channeling significant capital into stocks and bonds, underscoring sustained confidence in financial markets. However, Bank of America (BofA) strategist Michael Hartnett urges caution regarding certain segments, particularly richly valued U.S. technology stocks, while recommending increased exposure to gold, cryptocurrencies, and Chinese equities.
Strong Market Inflows Continue
According to BofA data, global equities attracted approximately $19.6 billion, and bonds garnered about $19.2 billion in net inflows over the week, contributing to one of the strongest investment flow years on record. Notably, cryptocurrency funds experienced inflows of around $1.9 billion, indicating growing investor appetite for digital assets. Meanwhile, investors withdrew approximately $11.9 billion from cash holdings, signaling a shift from liquidity toward risk assets.
Cumulative inflows into global stocks for 2025 are annualizing at an impressive $640 billion, ranking as the third-highest ever recorded. In the U.S. alone, equities have absorbed $59 billion during the first half of the year, showing no signs of diminished interest from foreign investors.
Regionally, European equities have seen seven consecutive weeks of inflows, amounting to $1.9 billion in the last week. Emerging markets attracted $800 million, although Japanese stocks faced outflows totaling $700 million.
Sector and Cap-Size Flows
In the U.S., large-cap funds absorbed $14 billion during the week, reflecting continued investor confidence in established, blue-chip companies. Conversely, other market segments encountered outflows: value stocks lost $1.4 billion, growth stocks dropped $1.7 billion, and small-cap stocks saw a reduction of $4.5 billion.
Among sectors, materials led inflows with $2 billion invested, while healthcare and real estate each experienced net outflows of $400 million.
Caution on U.S. Big Tech
Despite these inflows, Michael Hartnett and his BofA team advise vigilance, especially concerning the U.S. technology sector. The strategists point out that momentum in major U.S. tech stocks has become overstretched, partly due to enthusiastic expectations around exponential artificial intelligence (AI) capital expenditure.
Hartnett warns that for investors to maintain bullish positions in flagship tech funds such as MAGS, SOX, and ARKQ, these funds must achieve new highs—specifically suggesting MAGS surpassing $60, SOX exceeding 6,000, and ARKQ rising above $100. ### Favoring International and Contrarian Positions
BofA’s strategy favors a more diversified and contrarian investment approach. The team recommends staying long on international markets, anticipating that global investors will balance U.S. growth stocks with value offerings from the rest of the world (RoW).
Hartnett points to encouraging signs for Chinese equities, particularly small caps, which may benefit from the bottoming out of credit conditions, consumer demand, and real estate markets. The strategist suggests no fundamental barriers prevent H-shares from challenging the 10,000 level, buoyed by strong Chinese export growth and potential tariff relief linked to U.S. trade policies under former President Trump.
Gold and Crypto: Structural Longs
In addition to international equities, Hartnett reiterates a structural bullish stance on gold and cryptocurrencies. The current macroeconomic landscape, shaped by ongoing tariffs and sanctions, supports these assets as effective hedges against geopolitical risks and market uncertainties.
Fixed Income Flows Remain Strong
Fixed income markets also continue to attract investment. Investment-grade bonds received $10.2 billion over the week, extending their inflow streak to 14 weeks. High-yield bonds and emerging market debt each gathered an additional $1.5 billion, while U.S. Treasuries added $3.1 billion.
Municipal bond funds report their eighth consecutive week of inflows, and Treasury Inflation-Protected Securities (TIPS) saw an injection of $500 million, demonstrating investor appetite for inflation-protected and tax-advantaged fixed income instruments.
Market Snapshot (as of August 1, 2025):
- Nasdaq 100 (NDX): -1.96%
- S&P 500 (US500): -1.60%
- Hong Kong Hang Seng (HK50): -1.07%
- Gold Futures: +1.52%
- Bitcoin: -1.14%
- U.S. 10-Year Treasury Yield: 4.22% (-3.21%)
Conclusion
While global markets continue to attract substantial capital flows, Bank of America’s Hartnett advises investors to exercise prudence, especially regarding richly valued U.S. technology stocks boosted by AI optimism. Instead, Hartnett encourages a broader strategy including gold, cryptocurrencies, and selectively positioned Chinese stocks as areas with promising growth potential and diversification benefits in 2025’s complex investment landscape.