Investors stay ‘risk-on’ as 129 global rate cuts fuel rally: Bank of America

[Golden bull and metal bear]
robybret/iStock via Getty Images

Investors are continuing to chase gains across gold, stocks and credit markets as global monetary easing drives a wave of risk-taking into late 2025, Bank of America Securities strategist Michael Hartnett said.

He attributed the buoyant sentiment to the fading of “tail risks” that had loomed over markets a year ago, such as a disorderly bond selloff, a renewed trade war or further Federal Reserve tightening. Instead, 2025 has brought 129 rate cuts from central banks worldwide, calm U.S. Treasury volatility and record-high equity markets.

“Failed ‘tail risks’ and 129 global rate cuts [explain] why gold, stocks and credit [are] so bid,” Hartnett wrote in his latest weekly note on October 31.

Investors remain confident in a “Fed put, Trump put and Gen Z put,” suggesting faith that policymakers and younger retail investors will continue supporting markets, he said.

STRONG GAINS ACROSS RISK ASSETS

So far this year, gold has surged 53%, stocks 21% and bitcoin nearly 15%, according to BofA’s asset performance data. Credit markets have also rallied, with investment-grade bonds up about 10% and high-yield bonds 9%. In contrast, the U.S. dollar has fallen 8%, and oil is down 16% year-to-date.

The strategist said the “biggest bear risks” heading into 2025 have failed to materialize. Treasury volatility has dropped to its lowest level since 2021, the U.S. and China have struck a trade truce and the Fed is now cutting rates even as equities hover near record highs and credit spreads hit multi-year lows.

POSITIONING AND MARKET FLOWS

Recent fund flows show $36.5 billion moving into cash, $17.2 billion to equities and $17 billion to bonds, alongside a $7.5 billion outflow from gold after heavy inflows earlier this year. Japanese equities saw their biggest inflows since April, while materials stocks suffered record outflows.

Bank of America’s Bull & Bear Indicator ticked up to 6.3 from 6.2, reflecting broad global stock strength and improving credit conditions, even as high-yield and emerging-market inflows slowed.

OUTLOOK: RISK-ON UNTIL INFLATION REBOUNDS

Hartnett said asset allocators are likely to stay risk-on until inflation meaningfully reaccelerates. BofA’s base case assumes 81 more global rate cuts in 2026, which could shift if inflation trends toward 4%.

The “best pain trade for investors looking to hedge surprise Q4 tightening of financial conditions” is to go long the U.S. dollar, Hartnett said, citing signs of “froth” in risk assets and potential overconfidence in AI-driven equity leadership.

The strategist continues to favor gold and Chinese equities as hedges against speculative excess, while cautioning that a sharp reversal in key market “tells,” such as U.S. bank or junk bond weakness, could mark the end of the rally.

“Investors [are] front-running booms and bubbles,” confident that every dip still comes with a policy backstop, Hartnett said.

MORE ON S&P 500 INDEX, DOW JONES INDUSTRIAL AVERAGE INDEX, ETC.

* My Current View Of The SP 500 Index: November 2025 (Technical Analysis) [https://seekingalpha.com/article/4836757-my-current-view-of-the-sp-500-index-november-2025-technical-analysis]
* The 3 Things That Could Derail This Rally [https://seekingalpha.com/article/4836742-3-things-that-could-derail-this-rally]
* November 2025 Monthly [https://seekingalpha.com/article/4836719-november-2025-monthly]
* Wall Street poised for more gains after notching longest monthly win streak since 2021 [https://seekingalpha.com/news/4512658-wall-street-poised-for-more-gains-after-notching-longest-monthly-win-streak-since-2021]
* China to 'effectively eliminate' rare earth curbs, end probes of U.S. firms - White House [https://seekingalpha.com/news/4512659-china-to-effectively-eliminate-rare-earth-curbs-end-probes-of-us-firms---white-house]