(Bloomberg) -- With bonds and stocks once again falling in unison, cash is the ultimate refuge.

Global cash funds had inflows of $68.1 billion in the week through March 1, while $7.4 billion left equity funds, according to a note from Bank of America Corp, citing EPFR Global data. At $8.4 billion, bonds attracted new funds for a ninth straight week, strategists led by Michael Hartnett said. 

It’s a sign of nervousness as higher-than-expected inflation data means that global central banks will probably keep raising interest rates, dashing hopes that the stellar equity-market rally since the start of the year will endure. US stocks had their worst week of 2023 last week, falling 2.7%.

The end of the bear market will coincide with credit market stress, possibly stemming from falling house prices, Hartnett wrote. Until then, cash is as good as bonds and stocks, he said.

The renewed preference for cash holdings comes after investors poured money into the asset class during 2022’s market rout. Signs of cooling inflation at the end of the year meant some flows returned to equities, but many strategists, including Hartnett, warned that the early 2023 rally wouldn’t last.

Recent hotter-than-expected inflation data in both the US and Europe and hawkish rhetoric from a slew of US central bank officials this week has underpinned a rush back to the safety of cash and bonds. And, with history showing US equities have never bottomed before a pause in rate hikes, stocks are unwinding some of the gains they’ve made this year, while Treasury yields are again tracking higher.

Read more: Cash Is Beating 60/40 Portfolios for First Time Since 2001

US to Underperform

Global equities will continue to outperform the US due to China’s economic recovery on the back of its pandemic reopening, Hartnett said. Meanwhile, 10-year US bonds will trade below 4% only after a “hard landing” for the economy tames inflation, he said.

Hartnett was correctly bearish through last year, warning recession fears would fuel a stock exodus. In November, he expected stocks to bottom in the spring before rallying in the back half of 2023. He revised his outlook last month, saying a delayed recession will roil equities in the second half.

Among other trends, US equity funds saw outflows for a fourth week at $10.6 billion, while European funds suffered a second week of outflows as investors pulled $200 million. Emerging-market stocks attracted $2.4 billion of investment in a third week of inflows.

--With assistance from Michael Msika.

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