For many weeks in a row now we have been asking, mostly jokingly, how with everyone else (both retail and "smart money") selling, and with stock buybacks sharply lower in recent months, is the market higher. Specifically, who is buying?
This question is no longer a joke. After this week's 17th consecutive outflow by "smart money" funds (mostly on the back of surging hedge fund redemption), moments ago we got the latest Lipper fund flow data. It was, as BofA put it, "unambiguous risk-off weekly flows."
As BofA also put it: "Equities continued to experience outflows and lost $3.32bn (-0.1%) last week, their 4th consecutive decline. Year-to-date, equity funds have lost $58.6bn (-0.6%), the largest ever dollar outflow in any 22 week period for the asset class"
And yet, despite record retail outflows, despite record smart money selling, despite slowing buybacks, the S&P is not only higher on the year, but just shy off all time highs. At this rate the central banks will really need to reassess their strategy before they lose what little credibility they have left.
Here are the fund flow details from BofA's Michael Contopoulos:
Equities continued to experience outflows and lost $3.32bn (-0.1%) last week, their 4th consecutive decline. Year-to-date, equity funds have lost $58.6bn (-0.6%), the largest ever dollar outflow in any 22 week period for the asset class.
Global high yield saw a 4th consecutive week of outflows, led by non-US HY’s $2.2bn (-0.9%) outpour and partially offset by a minor $131mn (+0.1%) inflow into US domiciled high yield funds. The divergence is likely a result of US HY’s outperformance since the February 11th lows, outpacing its European counterpart by 6.5% over the 3.5 month span. Also a contributing factor is the ECB announcement of its Corporate Sector Purchase Program, which has caused European investors to pull money out of EU high yield and invest in ECB-eligible high grade corporates. Within the US, ETFs led the inflows (+$180mn, +0.5%) compared to a $49mn outflow (-0.0%) from non-ETFs.
Meanwhile, loans gained $94mn (+0.1%) in net inflows, driven by the greater odds of a summer rate hike. Investment grade corporates continued to benefit from sizeable inflows, gaining $1.29bn (+0.1%) last week for the 14th straight inflow. Other asset classes we track reporting flows last week include EM Debt (-$324mn, -0.1%), munis (+$1.23bn, +0.3%), money markets (+$7.41bn, +0.3%), and commodities (-$271mn, -0.3%). As a whole, fixed income funds recorded a $2.53bn inflow, or +0.1% of AUM
And the global flow details from Michael Hartnett
- Equities: $9.2bn outflows (7 straight weeks) (note $11.1bn mutual fund outflows partially offset by $1.9bn ETF inflows)
- Bonds: $2.6bn inflows (inflows in 12 of past 13 weeks)
- Precious metals: tiny $32mn outflows (only the second week of outflows in 20 weeks)
- Money-markets: $12.2bn inflows
Fixed Income Flows (Chart 2)
- First inflows to Govt/Tsy funds in 14 weeks ($0.6bn)
- Largest outflows from HY bond funds in 15 weeks ($2.1bn)
- Largest outflows from EM debt funds in 14 weeks ($0.3bn)
- $2.5bn inflows to IG bond funds (12 straight weeks)
- $1.2bn inflows to Munis (36 straight weeks)
- Inflows to TIPS funds in 14 of past 15 weeks ($0.3bn)
Equity Flows (Table 2)
- Japan: $0.9bn outflows (first outflows in 3 weeks)
- Europe: $3.3bn outflows (16 straight weeks)
- EM: $2.0bn outflows (4 straight weeks)
- US: $1.1bn outflows (outflows in 6 of past 7 weeks)
- By sector, first outflows from REITs in 14 weeks ($0.2bn); largest financials inflows in
- 5 months ($0.5bn); 6 straight weeks of tech outflows ($0.4bn)
To summarize: everything except ETFs was sold in the past week; while global equity outflows in 2016 are now at a record high $105 billion for the 22 week period.