Wall Street analyst highlights this winning ’permanent portfolio’ strategy

Investing.com -- Wall Street investors poured $8 billion into gold funds last week, the largest weekly inflow on record, according to Bank of America’s latest “Flow Show” report.

Stocks also attracted $7.9 billion, while $20.1 billion exited bonds and $72.4 billion left cash—the biggest cash outflow since January.

European equities saw their strongest weekly inflow since 2017, led by $6.0 billion into the region.

In the report, BofA strategist Michael Hartnett drew attention to a conservative investing strategy that appears to be outperforming amid the current choppy conditions.

The so-called “permanent portfolio,” equally split between cash, bonds, gold and stocks, is up 4.7% year-to-date, compared to a 5.4% drop in the traditional 60/40 portfolio, which allocates 60% to equities and 40% to bonds.

“60/40 long-run outperformance [is] at 14-year low,” Hartnett highlights, underscoring the appeal of more balanced and diversified allocations in the current market turmoil.

BofA’s broader view sees 2025 shaped by big themes—debt, deficits, and de-dollarization. Hartnett recommends staying “long BIG”—bonds, international stocks, and gold.

The call reflects expectations of U.S. policy pivots later this year, including tariff cuts and potential monetary easing, as well as persistent risks around inflation, global fragmentation, and policy mistakes.

Looking ahead to the second quarter, Hartnett advises investors to continue “selling-into-strength” until there are clear signs that the Federal Reserve is cutting rates and U.S. President Donald Trump is moving to reduce tariffs.

He sees room to start cautiously buying the S&P 500 around 5,400, or “nibble,” with a more aggressive approach at 5,100 if a “policy panic” appears imminent.  Alternatively, investors could wait to “gorge” at 4,800—an index level he believes would price in "short/shallow recession."

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Regionally, U.S. equity funds recorded $5.7 billion in outflows in the psat week, while Japan and Europe each saw renewed demand, with $2.4 billion and $6.0 billion of inflows, respectively. Emerging markets experienced $3.2 billion in redemptions.

In fixed income, investment-grade bond funds suffered $11.1 billion of outflows over two weeks, their worst stretch since mid-2022.

High yield and emerging market debt also posted outflows. U.S. Treasury funds, however, continued to see modest demand, with $2.6 billion of cumulative inflows over six weeks.

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