The fund flow paradox continues: US stocks trade just shy of all time highs as global outflows from equity funds continue with another $2.6 billion yanked in the past week; this represents 10 weekly outflows in the past 12 weeks. More confusing is that just in the US, $2 billion was withdrawn leading to outflows in 5 of the past 6 weeks.
So who is buying?
That is the implied question in the last fund flow note from BofA’s Michael Hartnett who points out that there has been risk-off flows in same week that total return of S&P500 & US HY at all-time highs, & 10-year yields for both German bunds & UK gilts hit all-time lows.
Some other notable observations from Hartnett:
- Weekly flows: $2.6bn equity outflows vs $7.9bn bond inflows & $0.7bn precious metals inflows
- More equity selling ahead of UK referendum: 18 straight weeks of outflows from European equity funds (Chart 1 = longest outflow streak since Feb’08); outflows from UK equity funds in 12 of past 14 weeks
- But it’s risk-on in bonds: largest inflows to HY bond funds in 11 weeks ($2.6bn); inflows to EM debt funds in 14 of past 16 weeks
- Note VIX futures open interest hit new all-time highs on 6/7/16 (501k contracts)…lots of volatility buyers ahead of “summer of shocks”
Asset Class Flows
- Equities: $2.6bn outflows (outflows in 10 of past 12 weeks) (note divergence between $4.5bn ETF inflows & $7.2bn mutual fund outflows)
- Bonds: $7.9bn inflows (largest in 9 weeks) (inflows in 14 of past 15 weeks)
- Precious metals: $0.7bn inflows (inflows in 20 of past 22 weeks)
Equity Flows
- EM: $0.9bn inflows (largest in 11 weeks)
- Europe: 18 straight weeks of outflows ($2.2bn)
- US: $2.0bn outflows (outflows in 5 of past 6 weeks)
- Japan: tiny $21mn outflows
- By sector, REITs see inflows in 15 of past 16 weeks ($1.3bn); 3 straight weeks of inflows to healthcare/biotech ($0.4bn – largest since Oct’15)
One day we will find precisely who is buying… but not yet.
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