The paradox of the US stock market continued for yet another week, because according to Bank of America citing EPFR data with the S&P effectively at record highs, US equity funds have suffered their longest outflows streak in 13 years, as investors pulled out another $2.6 from US stocks in the week ending Wednesday. That brings total outflows since late June to $30 billion, as investors allocated $36 billion to the rest of the world. The stretch of capital flight has surpassed such market "stress points" as the trough of the great financial crisis, the 2015 market peak and last year's Shanghai Accord.
"Since late June investors have withdrawn $30 billion from U.S. funds while adding $36 billion to the RoW (EM, Europe, Japan)," said BofA's Michael Hartnett in his latest "Flow Show."
While the outflows are the latest evidence investors are shunning US stocks in favor of better growth prospects elsewhere, having lost faith that President Donald Trump can deliver on his ambitious tax cut and spending campaign pledges, they are also a paradox because with investors - both retails and institutional - pulling money out of the US stock market and with buybacks suffering their biggest plunge since the financial crisis...
... it remains unclear who is actually buying.
And speaking of selling, nowhere was it more obvious than it the consumer sector, which posted its 3rd largest weekly outflow on record:
In more bad news for professional investors, broken down between passive (ETF) and active (Long Only mutual fund) investors, there has been a whopping $278 billion in ETF inflows YTD, offset by $73 billion in outflows from active managed funds.
Hartnett also noted that Japanese equities attracted $3.1 billion over the week, the biggest inflow in 21 weeks, while emerging markets pulled in $200 million. European equity funds posted their first outflow in 7 weeks, although the $200 million that was redemeed is dwarfed by this year’s inflows which now total $32 billion
Emerging market equities continued to top BAML's table of cross-asset winners in 2017, returning 27.4% year-to-date in dollar terms. European equities were in third place, delivering 18.7 percent, but suffered their first outflows in seven weeks, losing $200 million.
Overall, global equities attracted $3.1 billion, while bond funds pulled in $5.5 billion, with government bond and Treasury funds enjoying their largest inflows in 10 weeks at $900 million. Digging into the details reveals that the junk bond party appears to be on its last legs: there have been outflows from HY funds in 8 of past 10 weeks, with $2.2bn outflows in the past week.
Finally, Hartnett points out that in the past 4 weeks High net worth private clients have turning more defensive with inflows to healthcare, REITs, staples, low-volatility funds, and total capitulation from energy ETFs & MLPs, while private client allocation to precious metals ETFs remains near record low as everyone now appears to hate gold and silver.