Bank of America analysts said in their flow show note on Friday that the contrarian trade in June is to buy the Hang Seng and sell artificial intelligence (AI).
"Tech/stocks have discounted June Fed pause, leaves China stimulus as bullish June surprise...contrarian June trade is 'buy HSI, sell AI'...hedge with some beaten-up commodities, EM, resources, banks," the analysts wrote.
They believe the market is bored of waiting for rates to cause a recession, and investors are back to the biggest companies.
Meanwhile, the analysts noted that $14.8 billion flowed to stocks in the last week, with $11.2B to cash, $1.1B to bonds, and $0.2B from gold.
Last week saw the sixth week of inflows, on pace for $389B in inflows in the second quarter. Stocks recorded the largest weekly inflow since February, with tech posting the biggest inflow on record ($8.5B). Furthermore, consumer posted the largest outflow since October 2022.
The analysts noted that "sell in May worked."
However, they explained that flows show positioning is happily long credit now chasing the "summer rip tide” into tech and stocks. Positioning and technicals remain bullish risk, they said.
"We remain bearish (and wrong...investors is no mood to fade our 4.2k SPX target; we still think biggest 'pain trade' next 12 months Fed Funds 6% not 3%, that 4% unemployment, convinced EPS up, rates down unsustainable; summer rip will tighten financial conditions (see sneaky strong US dollar); also convinced math of $220 EPS + 20x PE + 150bps rate cuts won't add up."