US Stock Funds Suffer Biggest Outflow Since 2015 As Bond Inflows Soar

According to Bank of America's Michael Hartnett, citing EPFR data, in the latest week through April 5, there were $7.4BN in outflows from equities, the largest in 40 weeks. This consisted of $3.6bn in ETF outflows - largest in 40 weeks & first outflows YTD vs. $3.8bn mutual fund outflows.

By size & style: 3rd straight week of outflows from US value funds ($1.7bn), largest outflows from US growth in 10 weeks ($2.0bn); $0.9bn outflows from US small caps & chunky $10.3bn outflows from US large caps (largest in 82 weeks)

By sector: inflows to tech ($0.8bn, 5 straight weeks), materials ($0.2bn), utilities ($0.3bn), real estate ($0.2bn), infrastructure ($0.1bn); outflows from energy ($0.6bn, largest in 29 weeks),
financials ($0.3bn), consumer ($0.2bn), healthcare ($0.1bn)

At the same time, bonds recorded $12.4 BN of inflows, the highest in 8 weeks, with Treasuries posting largest inflows in 10 weeks as the "great reflationary rotation" crumbled once again. Curiously, this took place prior to the FOMC Minutes warning that stock prices are "too high."

By geography, the focus was entirely on the U.S., where stocks saw the largest outflow since 2015, or in 82 weeks, as $14.5 billion was redeemed. This was offset by Europe which had its second straight week of inflows ($900m); Japan drew $300MM while $2.4BN entered Emerging Markets.

An amusing chart shows that while tech funds attracted $800m of inflows, thee has been a surge of inflows into "robot funds."

A separate analysis from Lipper showed largely the same, as investors yanked the most money from U.S.-based equity funds since December during the latest week, on fears stocks may be overpriced given the many roadblocks in implementing U.S. President Donald Trump's economic policies, according to Reuters.

Lipper adds that nearly $12 billion drained from the stock funds in the seven days through April 5, including $7 billion SPDR S&P 500 ETF, a fund actively traded by investors ranging from institutional investors making speculative bets to retail buyers. Retail investors pulled back for another week, as stock mutual funds continued a streak of net outflows that has lasted the better part of the last two years. The outflow totaled $7.4 billion during the week. Meanwhile, U.S.-based funds invested in stocks abroad took in $1.1 billion during the week.

"There's a whole lot of uncertainty right now, which is never good for the equity markets," said Pat Keon, senior research analyst for Thomson Reuters Lipper. Keon said the United States' response to conflict in Syria and North Korea has intensified jitters over policy even though market returns have been strong.

Matthew Bartolini, head of SPDR Americas Research at State Street Global Advisors, said outflows likely include both long-term investors who are trimming their winning bets and shorter-term investors shifting to other markets, something suggested by Jeff Gundlach in his latest webcast.

Investors' worries also included March U.S. auto sales data, which this week came in far below expectations.

Finally, while active investors continue to suffer, passive vehicles such as ETFs are unable to hold the inflows: As Bloomberg's Eric Balchunas calculates, in the first quarter Vanguard alone took in $121 billion, amounting to an unprecedented $2BN per day, and was 46% better than any other Q1, Should the inflows into ETFs continue, Vanguard is on pace to rake in a record $480Bn for the year.