Retail Whiplashed By 2nd Largest ETF Outflow On Record; Longest HY Outflows Since 2007

It's time for JPMorgan to start worrying again that retail investors are no longer buying the fucking dip (as it did three weeks ago).

Just one week after Bank of America was "stunned" by record inflows into equities, this week everything went in reverse, following the latest Facebook-inspired sharp drop in stocks which brought the market back to the verge of a correction. The result was a "huge" $19.9 billion equity outflows, with the $18.6 billion in ETF outflows the second highest ever according to BofA.

The redemption follows record inflows of $43.3BN last week, and huge $151.7BN in YTD.

Predictably, the US was the focus of outflows, with $24.9BN in redemptions from US-based funds, the 2nd largest ever. And while more modest outflows continued from Europe ($1.5bn), investors continued to allocated capital to Japan, which has had inflows for 16 straight weeks, as well as EM, which saw another $2.0bn in inflows.

Broken down by style, the target of outflows was US large cap, which suffered $18.3bn in outflows, and US value ($7.2bn outflows), as well as US growth ($3.4bn), US small cap ($2.2bn), as hit with near record outflows just one week after record inflows.

Meanwhile, on a sector basis, tech once again saw inflows despite the crash in Facebook, although at only $0.5bn this may be on the verge of a historic inversion.

Inflows were also observed in utilities ($0.4bn), consumer ($0.3bn), real estate  ($0.2bn), and materials ($0.001bn), while healthcare ($0.2bn), energy ($0.3bn), and financials ($0.9bn) were hit by outflows.

And while investors fled equities, they rushed into "risk off" safe havens, with $1.5bn inflows to gold, $1.8bn into bonds. Of note, with equity investors suddenly getting cold feet, gold is reemerging as one of the favorite asset classes.

It wasn't all flight to safe havens, though, because according to the fund flow data, it's time to worry about credit and especially high yield, because as BofA's Michael Hartnett writes, "credit is cracking” after the 10th straight week of HY bond fund outflows - the longest streak since 2007 - as another $1.6BN was pulled; alongside slowing $1.4bn inflows to IG bonds (worst start for US IG returns since 1994), all amid investor concerns of excess leverage highest since 2010. Even junk ETFs - the preferred investment instrument by retail - have barely seen any positive weeks this year,

Commenting on the rising tide of junk bond outflows, Bloomberg warns that the positive momentum in Europe’s high-yield primary market this month may be short lived, as two weeks after the window for issuance opened, and 7.1 billion euros ($8.7 billion) of new issues later, persistent fund outflows seem set to slow sales as a looming trade war weighs on the market.

Investor outflows are “probably the biggest concern” in the European high-yield market, Armin Peter, global head of  DCM syndicate at UBS Ltd, said at a briefing event on Wednesday.

To this, BofA adds that European junk bond funds have suffered 19 straight weeks of investor redemptions, while February was the biggest month of outflows for high-yield funds since June 2013, the note said. A JPMorgan note on March 16 said cumulative outflows for junk is now at €3.4 billion so far this year.

This is starting to hit the primary market: this week TUI AG will not be pricing a planned bond issue, saying timing was subject to market conditions, while an entity within the Virgin Media Group sold receivables notes at the wide end of price talk. The weak appetite for the Virgin Media notes was likely indicative of the effect of outflows, because most investors who like the bonds are “pretty full,” said Azhar Hussain, head of global high yield at Royal London Asset Management.

Yields in the market are “too low for the risk” involved, according to Ville Talasmaki, head of credit investments at Sampo Oyj. “To me, a high yield bond is a low yield bond with high risk.” Talasmaki said he has been reducing his exposure by not re-investing when bonds mature and by selling some notes, he said - though in some cases he has bought “very selectively” in primary.

And just to demonstrate his thesis that "credit is cracking", BofA's Michael Hartnett shows the following chart which shows the sharp slowdown in relative flows for HY vs IG.


taketheredpill chennaiguy Fri, 03/23/2018 - 11:14 Permalink

Equities could certainly go to new highs.  But Central banks can't keep this afloat forever.

And when the equity markets do really break and we get the next crisis what will Central bankers do?

Give up?  Say "We tried, sorry, later gators"?

Nope.  They will go "ALL IN".

And since we are going into the next downturn with GDP at 2% and massive debt, cutting rates back to Zero won't be enough.

Another round(s) of QE won't be enough.

Assume they will create a massive QE program, possibly bypassing Financial Markets with $$ sent directly to consumers (Housing Vouchers?)

End of Treasury market, end of faith in Fiat currencies.

Gold wins.

Only question is the TIMING. So you don't bet the ranch on Gold, just add* on dips to a decent exposure (25%?). 


* beware unstable mining locations and stick to Can/US/Australia/maybe Mex




In reply to by chennaiguy

Endgame Napoleon ParkAveFlasher Fri, 03/23/2018 - 15:45 Permalink

My vow of silence starts earlier, ends later and is broken more often than yours on ZH. You don’t post that much. Maybe, that is because you are working in the financial industry. I don’t know anything about it, other than what I have read on here and seen in a few low level back-office jobs between the Halloween dress-up days and cubicle-decorating contests. 

In reply to by ParkAveFlasher

Rubbish Fri, 03/23/2018 - 11:14 Permalink

No need to brag The chart is a clear interpretation of my brilliance in being a Gold Bug these years on Hedge.


Need I say more?


Gold Bitchez.....I pick up pennies

Yen Cross Fri, 03/23/2018 - 11:17 Permalink

  What about all the passive[retail] investors that let some retard from "ACME Bucketshop" brokerage electronically invest in their 401k and pension plans every month?

  I'm sure all those sell side commission churning assholes, are looking out for their clients best interests.  haha

Scrot Fri, 03/23/2018 - 11:42 Permalink

And yes, this will cause gold to "SURGE" in coming weeks to a "massive gain" of about half a percent of the gain bitcoin has experienced.

Endgame Napoleon ThanksIwillHav… Fri, 03/23/2018 - 15:52 Permalink

You day traders will have more business, won’t you? Customers will be making more adjustments, adding to your job longevity. You might have a chance to make some of them money if things change. If everything stays the same in the bot-rigged system, it seems like it is a more of a static situation for you, but maybe not. I would think people who hire people to invest would call them more during any downturn.

In reply to by ThanksIwillHav…