Biggest US Equity Outflows Since Brexit; US Banks Hit The Hardest

Tyler Durden's picture

The latest evidence that rumors of Trumpflation trade's death are not greatly exagerated came overnight from Bank of America which reported that based equity funds saw net outflows of $8.9 billion, the largest in 38 weeks. The most impacted sector was, not surprisingly, banks - the biggest beneficiary of the post-Trump election victory rally, which suffered the biggest outflows in over a year.

Where was the withdrawn money paked? The usual place: bonds. According to Lipper, U.S.-based taxable bond funds absorbed $8.3 billion in cash during the week ended March 22, the most in eight months, while investors withdrew $1.3 billion from financial sector funds in the worst week of net sales for those funds since July 2015, Lipper said.

As Reuters notes, in both cases, the latest week's results are an about-face from the popular trades that followed U.S. President Donald Trump's election victory in November and come as investors questioned whether the new U.S. administration can soon deliver the fiscal and regulatory changes needed to support the "Trump trade" of higher equity prices and rising bond yields. The bearish-bond and bullish-bank trades have both diminished since November, and on Tuesday investors delivered a body blow to U.S. stocks and fled to safe-haven bonds. The S&P 500 and Dow Jones Industrial Average indexes lost over 1 percent that day in their worst one-day performances since before Trump's election victory.

"As investors have become more skeptical or wary of the ability of the president to drive through his policy agenda that's started to have negative impact on some of the areas in the U.S. which had benefited from that hope," said Richard Turnill, BlackRock Inc's global chief investment strategist.

While investors fled the US, they remain optimistic on EMs and Europe: while overall stock funds posted $1 billion in net withdrawals, the first week of outflows since January, equity funds invested abroad attracted $3.8 billion in the largest haul since December 2015. Emerging markets stock funds attracted $2.2 billion in their best week since August 2016 according to Lipper, while European stock funds gathered $636 million in their best week since December 2015. Japanese stock funds posted $593 million in withdrawals, their largest outflows since last July.

More details from the BofA report, broken down by region (EPFR not Lipper):

  • Europe equity funds see outflows of $0.8BN
  • Emerging markets equity funds see inflows of $2.8BN
  • Japanese stocks see inflows of $2.5BN

By investment style:

  • largest redemptions from U.S. value funds in 66 weeks,
  • largest outflows from U.S. small caps in 24 weeks

By sector:

  • inflows to materials, utilities, tech, energy, real estate; outflows from financials, consumer, health-care
  • In fixed income, bonds see inflows of $7.8b, with inflows in 12 of past 13 weeks
  • IG bond funds see inflows of $5.7b; HY bond funds see outflows of $1.3b; EM debt funds see inflows of $2.7b

On the FICC side, the biggest winners continue to be EM debt and gold and silver, while Junk bonds remain the most impacted.

Finally, some more insight from Michael Hartnett:

Risk-off week for flows

  • $7.8bn inflows to bonds, $1.1bn inflows to gold (largest in 5 weeks), $1.1bn outflows from equities.

The TARP moment

  • Failure of AHCA (American Health Care Act) is unlikely to cause a "TARP moment" (GT30 -25bps, SPX -9% on Sept 29th 2008), but could cause final flush in "reflation trades", especially given CTA positioning.

Where's the Beef?

  • In our view, the Trump trade was always going to have a "where's the beef?" moment. Hard data recovery and renewed optimism on tax reform (only 10% think passage by Aug) catalysts to inspire final capitulation into risk assets spring/summer. Reflation trades will likely rally again. We continue to believe the Big Top happens Q3 at earliest.

New theme: synchronized monetary tightening

  • Synchronized global recovery past 2-3 quarters now being followed by synchronized central bank tightening next 2-3 quarters…end of excess liquidity is the major reason we think markets are likely to enter a major "topping process" in 2017.

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VinceFostersGhost's picture

 

 

Well......we haven't actually done Brexit yet.

 

Absolutely need to get on that sh!t.

Fiberton's picture

Brexit stuff starts March 29th if I recall correctly. 

Ghost of PartysOver's picture

suffered the biggest outflows in over a year

Anytime I see statements like this I immeadiately think "Buying Opportunity in the Near Future". 

new game's picture

insiders running with the heist of a lifetyme boosted by cheap money buybacks.

jig is up and they know it. smart money running out the exits before trampling of mom and pop suckers...

Fiberton's picture

Brexit stuff starts March 29th if I recall correctly. 

29.5 hours's picture

<<Where was the withdrawn money paked?>>

Puked? Always the question nowadays...

syzygysus's picture

Great place to move your money, right into the bond market ultra-bubble.  What could go wrong?

yogibear's picture

Obamacare lite will be rejected for the second time.

Trump needs to stop catering to Paul Ryan.

Trash it and re-write from scratch.

VinceFostersGhost's picture

 

 

Trump needs to boot Ryan out of the car on the interstate doing 75......and not slowing down.

 

Marine One at 5 thousand feet......would be even better.

unklemunky's picture

This is today. What is your guess tomorrow? And if you are such a good prognosticator with your crystal ball, why are you wasting your fucking time writing here on ZH? I just love all the fancy schmancy talk. You fuckers are just like everyone else. You have no clue what today brings and have no clue what the masses will do the next time Trump burps or tweets. These kinds of articles are bla bla bla. Like a reporter standing in front of a train wreck talking about what just happened. Remember people, there are no experts......anywhere.....on anything. Anytime someone tries to sell you on their expertise pretty much means they are not experts. Real experts are sought after because their actions and results. Fake experts have to have a sales pitch and are always chasing the spotlight. I predict that today will be unpredictable. Invest accordingly. I myself prefer a coin toss and a stop loss.

Giant Meteor's picture

Its all bullshit, all the time.

Beat the rush!

BritBob's picture

Brexit

 

There is a trade imbalance in favour of the European Union so it is in the interest of the EU to make amicable arrangements with the United Kingdom. What's more, the UK can do its own trade deals on a one-to-one basis instead of having the EU to deal 27 member states before it makes a trade deal.

The UK will opt for a hard Brexit especially when one country (or part of a country in Belgium) can stall negotiations for so long. Spain could act in a similar fashion over Gibraltar and has the cheek to maintain its Gibraltar sovereignty claim. Claim?

Gibraltar - Some Relevant International Law: https://www.academia.edu/10575180/Gibraltar_-_Some_Relevant_Internationa...

So it looks like a quick hasta luego !

 

Ban KKiller's picture

If you have any dealings with B Of A beyond a checking account you know how incredibly incompetent they are. Their legal department attorneys are hacks who hide in their daddy's skirts. I like fighting them in court as I know they are sloppy and addled. So, trust them to lie and misdirect as they can't address the truth. 

DavidC's picture

Hang on a minute, wasn't it just last week we were being told about the massive US equity INFLOWS?!

DavidC

TeethVillage88s's picture

And 4 weeks ago, inflows were to ETFs?

I heard an International Fund is doing well now. Saw that just before found outflows signaled 2008 Crash.

TeethVillage88s's picture

And Massive surge in Gold prices?!

TeethVillage88s's picture

Remember Massive surge in Swiss Francs when they unlinked to Euro? Now sits USD = CHF. WTF? Perhaps the story was overblown or Swiss investments in US Tech and Equities brought down the value of the Swiss Franc?

Money_for_Nothing's picture

Michael Pettis has show that a country can buy any currency that is traded globally and force a trade surplus. US Equities would work as a currency in this context without being logged directly by the Fed or US Treasury. SNB only concern would be a change that brought all the Swiss Francs back home at the same time US equities went down significantly.

tbone10's picture

Yada yada......yada

Money_for_Nothing's picture

EM and Europe? (sarcasm) I'm sure those two areas will be booming if the US is in recession.

Grandad Grumps's picture

I have never understood these metrics.

Presumably there is a buyer for every seller ... except where bank debt is concerned.

So, a negative flow can only be a decline in value/price ... right?