(Bloomberg) -- Investors are still flocking to cash funds, and Bank of America Corp. strategists say history suggests redemptions won’t begin until a year after the Federal Reserve starts cutting interest rates.

Money-market fund flows rose in anticipation of the first cut over the past five rate reduction cycles, before inflows slowed meaningfully when the central bank actually started cutting rates, a team led by Michael Hartnett wrote in a note. Outflows began 12 months later, they said.

Investors are still in the phase of pouring into cash funds, which received $82 billion in the week through Wednesday, according to the BofA strategists who cited EPFR Global data. Money-market funds are annualizing $1.2 trillion of inflows, the second highest ever. 

Cash funds have been seeing massive inflows for several months, far above other asset classes like equities, showing investors likely missed out on the S&P 500’s 34% rally since the start of 2023.

Stocks have been climbing amid optimism about artificial intelligence developments and an economy that’s held up better than expected in the face of interest rate hikes. But US shares weakened on Thursday as rising oil prices and a series of hawkish comments from Fed officials spooked traders.

Investors had poured $7.1 billion into US stocks in the week ahead of the selloff, the note showed. US equity flows are annualizing to $310 billion, the second highest ever. Tech stocks are annualizing $73 billion, an all-time high.

--With assistance from Michael Msika.

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