Global stock funds saw the largest outflow since December last year, Bank of America warns of the risk of a hard landing.

Based on the prospect of central banks in Europe and the United States maintaining interest rates at higher levels for a longer period of time, the risk of economic recession has increased, leading investors to sell off stocks and other assets in large quantities in the past week, with the selling pressure reaching its highest level since December last year.

According to a report cited by Bank of America on Friday, based on EPFR Global data, global equity funds saw a net outflow of $16.9 billion in the week ending September 20, with the largest outflow occurring in U.S. equity funds, and European equity funds experiencing outflows for 28 consecutive weeks.

Global bond funds recorded 26 consecutive weeks of inflows, with the latest week seeing an inflow of $2.5 billion. Cash funds experienced an outflow of $4.3 billion.

In terms of sectors, technology stocks led the inflows, while energy stocks saw the largest net inflow since March, and the financial and healthcare sectors experienced the most outflows.

Michael Hartnett, a prominent analyst at Bank of America, stated that persistently high interest rates could lead to a hard landing for the U.S. economy in 2024 and cause turmoil in the financial markets. There are already signs in the current market, including a steepening yield curve, rising unemployment and personal savings rates, as well as an increase in defaults and delinquent payments.

Hartnett maintains his bearish view on the U.S. stock market in his latest report. With the unexpected sharp rebound in U.S. stocks this year, many analysts on Wall Street who were originally bearish have turned bullish, but Hartnett remains one of the steadfast bearish analysts.

U.S. stocks reached their annual high in July this year, followed by a significant decline. This week, U.S. stocks and bonds fell in response to hawkish statements from central bank officials in Europe and the United States. The S&P 500 has fallen for three consecutive weeks. The benchmark 10-year U.S. Treasury yield, known as the "anchor of global asset pricing," briefly surpassed the 4.50% mark during Asian trading on Friday, the first time since 2007.

Hartnett also pointed out market dynamics to watch: how the stocks that led the market earlier this year will perform if U.S. bond yields decline. Specifically, if a decline in U.S. bond yields leads to a sharp rise in stocks of U.S. homebuilders and chip manufacturers, it would indicate a bull market; otherwise, it would be a signal to sell during the last rate hike and enter a bear market.

Other well-known analysts on Wall Street have also warned of the risks facing the U.S. stock market. Marko Kolanovic of JPMorgan stated that rising real interest rates and capital cost constraints pose risks to the U.S. stock market. Michael Wilson, a famous short seller at Morgan Stanley, informed his clients this week that he believes the outlook for the U.S. stock market in 2024 is even more challenging.

An analysis article on the Wall Street Caijing website pointed out that the market has truly begun to accept the new rules of "higher rates for a longer period of time," and stocks and bonds are facing a triple threat. The statements from central banks in Europe and the United States this week were even more hawkish than the market expected, and in the case of higher long-term interest rates, the market has no choice but to accept the reality of "longer-term high interest rates." As the yield on the 10-year U.S. Treasury bond continues to rise, the U.S. stock market may soon reach its limit.