- Investors shifted massive amounts of money over the past week during the Wall Street tumult.
- Bonds saw their biggest outflows ever and cash took in its most money in a single week, according to Bank of America.
- The bank sees more damage coming unless policymakers deliver significant stimulus soon.
Investors indiscriminately moved money around multiple asset classes at record pace during the past week's tumult on Wall Street, signaling more damage to come if policymakers don't take aggressive action.
Bond funds saw the biggest outflows ever at $25.9 billion, while cash saw its biggest inflow at $139.6 billion, according to Bank of America Global Research. Stock funds lost $4.7 billion and the financial sector saw a record outflow of $3.3 billion. Gold saw its biggest inflow ever of $3.1 billion, while energy took in $1.3 billion, its biggest haul since December 2015.
And that was all before Thursday' washout, which saw the Dow Jones Industrial Average lose just shy of 10%.
The good news is that the moves helped trigger a contrarian "buy" signal on Bank of America's "Bull & Bear Indicator."
The bad news is that the selling could intensify if policymakers don't address concerns shown in the market, which is nearly 30% off its record highs, then things could still get worse.
Investors will need a "big coordinated stimulus" over the next few days or there could be a "fresh Wall St crash to force more extreme measures in coming weeks," Michael Hartnett, the bank's chief investment strategist, wrote in his weekly rundown of where money is going.
Congress has been working with the White House on a stimulus package. Treasury Secretary Steven Mnuchin told CNBC on Friday that the package is coming together soon. "I think we're very close to getting this done," he said. "The president is absolutely committed that this will be an entire government effort, that we will be working with the House and Senate."
The Federal Reserve has also taken a number of monetary policy measures, such as increasing its repo operations and broadening its asset purchases.
Among those big stimulus measures Hartnett anticipates are President Donald Trump announcing a cut in tariffs, Japan reducing its consumption tax, Germany allows for budget deficits that would defy European Union rules, and G-7 nations agreeing to aggressive spending measures. The G-7 moves are akin to a philosophy known as Modern Monetary Theory, which advocates heavy government spending in times of low inflation and wide economic disparities.
Mnuchin said tariff relief is not on the agenda at this time, though he said the administration is considering help to select industries.
Hartnett said he is looking for the Fed to open up an aggressive quantitative easing program that would be "massive" and "sets up big market rebound if credit crunch averted and fiscal policy short-circuits recession."
Moreover, he expects that once the current panic starts to fade it will "induce [a] major rotation" into growth stocks and bond proxies such as high dividend payers, FAANG stocks, software, mortgage REITs, utilities and inflation-sensitive sectors like Asian equities and emerging market stocks and oil.
Markets were poised for a big opening Friday after a cascade of selling that ended the longest bull market run in history after 11 years.
While the market downdraft has triggered BofA's buy signals, Hartnett cautioned that its "Bull & Bear" indicator also flashed a buy back in July 2008 — two months before Lehman Brothers collapsed and led to the worst of the financial crisis.