The Great Rotation Ends: Largest US Equity Outflows In 4 Months; Biggest Treasury Inflows Since July

Tyler Durden's picture

While the S&P500 market may remain pinned just why of all time highs, this appears to be from ongoing short covering, and is not - at least in the latest week - the result of new money entering the market. Quite the opposite: according to the latest BofA fund flow analysis based on EPFR data, in the latest week, US equities saw $6.3 billion in outflows, the largest weekly redemption from US mutual funds and ETFs in four months, since before the presidential election. And as investors pulled cash out of US stocks, they quickly reallocated it back into bonds, with all major classes seeing inflows, with notable mentions for government bonds, which had the biggest inflows since July 2016, and TIPS, where the demand for inflation protection is now the highest since the great China reflation scare of 2011 (it proved quite transitory).

Here are the details from BofA:

Bottom-line: investors continue to position for reflation via TIPS over munis, HY over gold & Japan over US equities; but the re-positioning feels grudging and flows have yet to show big asset allocation capitulation out of bonds into stocks

The first week of Trump: flows show largest weekly bond fund inflows in 4 months ($8.6bn), tiny equity fund inflows ($0.2bn) and precious metal outflows ($0.2bn) On bonds: inflows to HY bond funds in 8 of past 9 weeks; inflows to bank loan funds in 25 of past 26 weeks; inflows to TIPS in 31 of past 33 weeks (Chart below)…all reveal relentless bid for yield & inflation-protection; but note this week’s govt bond fund inflows were biggest since Jul’16

On equities: largest EM equity fund inflows in 3 months ($1.0bn); largest 3-week inflows to Japan equity funds in 16 months ($8.8bn); inflows to materials funds in 11 of past 12 weeks = clear bias towards reflation/inflation BofAML GWIM ETFs: last week our private clients added to risk (bank loans, financials & HY) & inflation plays (precious metals, TIPS) and sold down defensive/yield-plays (lowvol, dividend-income, munis, REITs & staples)

* * *

Asset Class Flows

  • Equities: tiny $0.2bn inflows ($5.5bn mutual fund outflows vs $5.6bn ETF inflows)
  • Bonds: $8.6bn inflows (largest in 4 months) (5 straight weeks)
  • Precious metals: $0.2bn outflows (outflows in 10 of past 11 weeks)

Fixed Income Flows (Chart 2)

  • Inflows to HY bond funds in 8 of past 9 weeks ($1.5bn)
  • 5 straight weeks of IG bond inflows ($3.6bn)
  • 11 straight weeks of inflows to bank loan funds ($1.1bn)
  • 7 straight weeks of inflows to TIPS funds ($0.5bn)
  • First outflows from EM debt funds in 4 weeks ($0.4bn)
  • Largest govt bond fund inflows since Jul’16 ($1.4bn)

Equity Flows

Japan: strong $3.1bn inflows (inflows in 4 of past 5 weeks)

EM: $1.0bn inflows (largest in 3 months)

Europe: small $0.2bn inflows

US: $6.3bn outflows (largest in 4 months)

By sector: largest healthcare outflows ($1.0bn) from healthcare in 10 months (outflows in 8 of past 9 weeks); largest tech inflows in 14 months ($1.0bn); inflows to materials in 11 of past 12 weeks ($0.6bn)

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D Nyle's picture

Elites taking Trump serious, re-adjusting

Leveraged Algorithm's picture

Here is my best advice.  Never trust B o A or anyone associated with them especially with financial numbers.

two hoots's picture

People waiting  on the 10Y to take off.   Why buy unstable/unpredictable dividend stock paying 2.5-3%  when you "might" soon get a 10Y at 3-4% or more?

Arnold's picture

The "Financial Advisor" I talk with occasionally, works for a well known brokerage.

His 'guidelines' have 30% of OPM out of the markets, sidelined for opportunity.

It must get old, playing the waiting game.

He reads ZH, by the way...

Cult of Criminality's picture

On the Physical Silver front,

The U.S. Sourced just about 3000 mt of Silver from Mexico in 2015 1000 mt more

than next in line exporting to U.S., Canada with about 2000 mt

So it will be interesting to see where the U.S. will come up with the extra 1000mt

if Mexico says FU and then also what happens to the Mexican Silver export market.

Guessing, Communist Canada will be exporting more to U.S.. Could be good for U.S

and Canada Silver producers.

Stuff to think about

Cult of Criminality's picture

The site is for thinking people.Was thinking out loud

(other choices besides bonds, equities) but you can jump in those or

stare at your dot, downvote others whatever you please.


Money_for_Nothing's picture

Mexico will say, "yes sir Mr. Trump."

Mexico is disintegrating. Trump will replace the current Mexican kleptocracy with something better.

Mexican President will be replaced with one that likes their pussy being grabbed.

wisetrader224's picture
wisetrader224 (not verified) Jan 27, 2017 11:43 AM

So what is the point?  Is ZH still saying the markets are ready to crash as they have for at least 5 years?

Do people actually think that anyone of these so called analysts has a clue as to what they are doing?  I want to see time stamped charts and articles from the past that prove their record. Oh that is right, they do not do that.


Well one analyst does just that to prove they make correct market calls. 


Here are their past charts showing they make correct market calls:  

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) wisetrader224 Jan 27, 2017 12:10 PM

This mom’s basement dwelling, failed trader, now spammer - ScamWave - registered the following spam accounts to promote their scam.

Please don't give him the satisfaction of seeing his site hit counter go up from ZH clicks. He's not very bright, but eventually he’ll go away if his spam scam doesn't bring income from ZH. The spam accounts are: AliSONY, Babs.St.Louis, Billy G, Chi Juan, Dr.Carl, ErikE, FemDayTrader, FRLEPU, Irvingm, jasony, John Beau, KanSass, KC Spike, MadhyaBharatx, Marilee, MexInvest, MikeM54, Miss Lou, Mon T, P Christmas Carole, Penny Trader, Pinky and the Brain, PUNE,  RoBERTAZ, RonnieM, RudolPHDs, Sonya B59, Stan Your Man, StevieTexie, Timming, Van G, Virginia Wooolf, wisetrader224, and xantippa
Money_for_Nothing's picture

"US mutual funds and ETFs"

I am not sure these actually own any equities. How would you know?

BofA says stocks are being rotated out of into bonds. Talking their own book? BofA has been linked in the past to the CIA. How about now?

I recommend buying individual stocks with a low PE that pay a dividend for preserving dollar value. Not as good-as-gold or silver but closer to spending money than most other options.

Herdee's picture

Bump up interest rates and the Dollar will skyrocket. Safe haven Treasury Bills to finance debt.

withglee's picture

inflows to bank loan funds in 25 of past 26 weeks; inflows to TIPS in 31 of past 33 weeks (Chart below)…all reveal relentless bid for yield & inflation-protection; but note this week’s govt bond fund inflows were biggest since Jul’16

Someone please explain to me how buying bonds brings "inflation-protection".

Pasadena Phil's picture

Markets are hitting all-time highs lately purportedly because shorts are covering for fear that the market is about to crash and taking their money into the safety of bond market as interest rates are likely to rise. Makes sense to me.

Actually, someone is going to have to explain that to me. Don't you cover your shorts at the bottom of a sell-off to capture your gains before the market RALLIES? If they are so sure the market is going to tank, why not hang around!