A massive outflow of cash from banks began, the level of the beginning of the pandemic

Bank of America strategists have observed an increase in investor panic and a rush to withdraw cash from banks due to growing concerns of an economic slowdown and potential decline in the stock and credit markets in the coming months. The strategists, led by Michael Hartnett, noted a "credit and stock market greed ahead of rate cuts" without fear of a recession. Therefore, investment-grade spreads and equities are expected to experience a sharp decline over the next 3-6 months.

In recent days, the market has been tense following the collapse of several US banks and Swiss bank Credit Suisse, which was ultimately purchased by its competitor UBS with the help of the government. However, this has not affected central bank policy; in fact, the Federal Reserve System, the European Central Bank, and the Bank of England have insisted on raising rates to curb inflation despite the banking system crisis.

According to EPFR Global, there has been an inflow of nearly $143 billion in global cash, the highest figure since March 2020, with over $300 billion over the last four weeks. Money market fund assets have grown to over $5.1 trillion. Previous similar spikes coincided with significant reductions in the Fed interest rate in 2008 and 2020.

As there is expected to be a sharp reduction in the Fed interest rate over the next 12 months, the strategist advised investors to sell equities after the last rate hike due to the negative impact of rising unemployment after wage funds are exhausted.