(Bloomberg) -- Investors are pulling money out of equities as a strong US economy and sticky inflation fuel concerns that the Federal Reserve will keep interest rates higher for longer, according to Bank of America Corp. strategists.

A team led by Michael Hartnett wrote in a note that good economic news is now bad news for stocks, a shift in mindset from the first quarter when “good news = good.” Evidence of this is the $21.1 billion investors redeemed from stock funds in the two weeks through Wednesday, the most in a fortnight since December 2022, BofA said, citing data from EPFR Global.

Stocks have slumped in April after a strong first quarter as traders scale back their bets on rate cuts in the face of hot inflation and job-market prints. An escalation of the conflict in the Middle East is also weighing on risk appetite because of worries it will cause higher energy prices that further delay central bank policy easing.

Hartnett said bulls regard this pullback as “healthy” while bears are growing wary over US growth stocks as they struggle to break new highs. Meanwhile, there are ominous signs in high-yield bonds, which are set to signal a “more sinister transition to ‘bad news = bad,’” he said.

In other significant weekly flows, almost $160 billion left cash funds, while bonds attracted $5.7 billion. 

--With assistance from Michael Msika.

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