Hurry up and buy! Bank of America recommends buying Chinese and European stocks before Trump takes office.

A strategist at Bank of America has stated that as monetary and fiscal policies are expected to take more supportive measures to counter Trump's tariff plan, investors should start putting more funds into stocks outside of the US next year. "Buy international stocks China, Europe before Inauguration Day," wrote Michael Hartnett's team in their weekly fund flow report. They mentioned that China will ease fiscal policies, and the European Central Bank will "significantly" lower interest rates in anticipation of Trump raising export tariffs after he becomes president on January 20. This is a reversal of the trend where investors have been putting funds into US assets since Trump's comprehensive victory in the election last week. The Bank of America strategist stated that market sentiment towards Europe and China has now reached levels close to "buying assets performing poorly." Since Trump's election, stock markets in Europe and China have seen declines, while the US stock market has continued to rise and dominate global stock markets, as investors bet that Trump's pro-US policies will benefit domestic assets. The post-election trends can be seen in fund flows, as more than $55 billion has poured into the US stock market in the past week, while funds totaling $10 billion have exited Europe and emerging markets. The S&P 500 Index has risen 25% year-to-date, while the Euro Stoxx 600 Index has only risen about 5%, marking its worst performance compared to US indices in nearly 30 years. After three consecutive years of significant declines, the MSCI China Index rose by 14% in 2024 driven by large-scale stimulus measures. However, the bank strategists now believe that lower borrowing costs, currency devaluation, and falling oil prices will lead to significantly relaxed financial conditions in Europe and China compared to the US. They pointed out that since the election, there have been no other trading options besides going long on the US dollar and US stocks, and going short on US Treasury bonds. But they mentioned that as US financial conditions tighten, there may be a reversal before Inauguration Day next January. The yield on the US 10-year Treasury bond has risen from around 3.8% in early October to over 4.4% currently. Hartnett and his team have had mixed performance. Last April, they leaned towards stocks outside the US in anticipation of an economic downturn, which did not materialize. Instead, driven by tech giants, rate cuts, and economic resilience, the US stock market continued to outperform other regions worldwide. Other strategic recommendations put forward by Hartnett for the new year include buying US Treasury bonds if yields rise to 5%, as the Federal Reserve can suppress rising inflation expectations by not cutting interest rates in 2025. The strategists stated that gold and cryptocurrencies remain the best tools to combat inflation. Data from EPFR Global cited by Bank of America shows that $1.6 billion flowed out of gold in the past week, the highest level since July 2022, while a record $6 billion poured into cryptocurrencies after Trump expressed support for digital assets during his campaign.