FAST FIVE: How Are Markets Higher: Buyers' Strike Continues For 12th Straight Week
As we discussed last week, and the week before that, one of the more bizarre observations to emerge over the past nine weeks has been that despite the torrid rebound in stocks so far in 2019, culminating with the best January for the S&P since 1987, investors have shunned US equities, selling stocks when they should be buying, and allocating the proceeds into “yielding” instruments such as bonds and emerging markets, as the following recent chart from Bank of America demonstrated.
And now, according to the latest weekly EPFR data, the conundrum refuses to go away for yet another week, because despite the latest breakout in stocks, which are just a few points away from the “massive resistance” level that is 2,800 but their Sept 20 all time highs, the selling continues unabated, with global equity funds sees another $12.7 billion in outflows ($1.1bn ETF outflows, $11.6bn mutual fund outflows).
The picture for equity funds targeting the US stocks was even worse, as US equity funds saw a $4.6 billion outflow in the latest week, the 12th consecutive week of outflows according to BofA, in other words for the entire duration of the past 9 weeks rally, investors have been continuously selling stocks.
Instead of reallocating funds to risk despite the Fed's recent dovish relent, investors have continued to plow money into yield, with the last week seeing $4.6 billion in bond inflows including inflows to IG ($2.3bn) & HY ($0.5bn), and the recent trend of buying “yield” continuing with $36BN of IG/HY/EM debt allocated in past 6 weeks from the proceeds of selling of $51BN in developed market equities over the past 6 weeks, with an emphasis on selling economy-sensitive assets such as financial stocks which are simply unable to catch a bid.
As Bank of America showed earlier this week, corporate buybacks last week not only offset the selling by all of the bank's other clients, leading clients to remain aggregate buyers of single stocks overall.