Fund Flows

We present a detailed analysis of international capital flows as disclosed by yesterday's most recent TIC data. Among the key observations we note that while foreign buying of Long Term Treasuries came at a healthy $61.4 billion in total net long-term treasuries, this was coupled by record selling of corporate debt, to the tune of ($24.6) billion. January also saw a net sale of over $5 billion in agency securities, offset by $4.3 billion in stock purchases.

Mutual fund flows, or the absence thereof, have drawn some recent attention as related to the price movement in the domestic equity market. The following analysis looks at this topic in addition to some other useful observations including seasonality, historical net new cash inflows, taxable bond funds, corporate spreads, and treasuries.

November saw bullish ETF action, with over $8 billion in top 10 inflows, spread primarily among emerging markets, commodities (specifically GLD), and, surprisingly, the dollar, via the UUP. In the outflow category, the Russell 2000 (IWM) continues to be the biggest loser at ($775) million, even as its S&P sibling, the SPY saw an inflow of $857. We believe this confirms the activity which has started in recent months, of rotation from higher beta stocks (RUT) into merely high beta ones (SPY).

"You can not fight the government, you can not fight the Fed" - Joe Saluzzi

Who knows, maybe he is wrong