Retail Investors Celebrate 32 Consecutive Weeks Of Equity Outflows By Pulling Money Out Of Taxable Bond Funds As Well

That ICI has just confirmed the 32nd consecutive outflow from domestic equity mutual funds is not surprising. After all, we have long been saying that retail's love affair with stocks has gone straight to the bitter divorce stage. That the amount of outflows was a massive $2.7 billion is a little more surprising: after all the prior week (ending December 1) was just $1.7 billion, and the market really hit the after burners since then in its last ditch attempt to get the dumbest money in. It failed (and total outflows year to date are not $96 billion: we expect $100 billion through the end of the year). But what is truly surprising, and what debunks every myth that investors are now rotating out of bonds and into stocks, is that in the last week in addition to a surge in domestic equity outflows, for the first time in what seems forever, there was also an outflow of $401 million in taxable bond funds (in addition to $1.3 billion in outflows from muni bonds). Hopefully we can now leave all debate about capital rotation out of fixed income into stocks, courtesy of rising rates, in the dust (same as debunking the whole "money on the non-repatriated sidelines" falacy). In fact the only asset class that saw any inflows were foreign equities. Of course should the reverse decoupling that the "experts" on TV are predicting, and the US outperform developing markets, the foreign asset flows will promptly reverse as well. Yet the bottom line is that all who were expecting a rotation out of bonds and into equities, are proven wrong, and just as we have been predicting for 32 weeks now, equity-related capital withdrawal decisions are completely disconnected from what happens in the rates domain, and the primary objective is capital extraction. Simply said: the latest target of all outbound sector rotation is cash.

Weekly flows:

And cumulative flows - indicatively, since the market surged from its September lows, there have bee over $41 billion in cumulative outflows.