Investors stormed into financial and energy stocks last week, BofA's weekly fund flow statistics showed on Friday, frontloading positions on expectations US President-elect Joe Biden was planning a huge stimulus package.
Biden on Thursday announced a $1.9 trillion plan to help the US economic recovery and step up the fight against Covid-19, more than markets had expected.
The reflation trade saw stocks bagging $26.8 billion inflows, with energy attracting $3.6 billion, the second highest ever. Financials, meanwhile, saw a "meaty" $2.1 billion flowing in, the US investment bank said citing EPFR data.
Investors poured $1.8 billion into Treasury inflation-protected securities (TIPS) amid rising inflation expectations. In the US, the 10-year TIPS is now pricing in average annual inflation of 2.09% for the next decade.
With inflation expectations dominating market action, BofA said inflation assets outperformed deflation assets in 2021 by the most since 2006.
Emerging market equities saw their sixth largest inflow ever at $7 billion, the report said, along with a record inflow of $2.5 billion into municipal bonds driven by tax expectations.
Global stocks as measured by MSCI's All Country World index hit record highs this week.
BofA's Bull and Bear indicator remained unchanged at 7.1, indicating that a peak in positioning had been postponed.
The bank said that with at least 32 million vaccine doses administered in the past 12 weeks, the global vaccine rollout has significantly lagged its projections.
However, the bank's base case still favours vaccines prevailing over the virus, a reopening over a recession, more fiscal stimulus, and a rotation in stocks.