Flows, Sentiment, and a Cautious Undercurrent

Beneath the buoyant tape, positioning indicators are flashing caution. Global equity funds attracted about 98 billion dollars in inflows over the past week, the highest weekly haul on record, led by US-focused vehicles, while bond fund inflows slowed for a fourth consecutive week. Chinese equity products logged their third-largest weekly inflow of 2025, and emerging-market stocks saw their strongest demand since April, underscoring a broad “risk-on” stance.

Bank of America strategists say their sentiment gauge at 8.5 reflects a “perfect storm” of low cash levels, heavy equity and commodity exposure, and widespread belief in a benign economic backdrop, conditions they describe as a contrarian warning for risk assets. Separate survey work this month shows big investors are the most optimistic in more than four years, with allocations to stocks and commodities at their highest since early 2022 and expectations for global growth and profits at multiyear highs.

For now, hopes for a smooth conclusion to 2025 remain supported by expectations that delayed US data will confirm robust third-quarter growth of roughly 3.2% on an annualized basis, helped by a pullback in imports after tariff-related front-loading earlier in the year. Yet with sentiment stretched, any disappointment in growth figures, tech earnings, or central-bank messaging could quickly test the resilience of Asia’s year-end rally.

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