Inflows to Wall St: $7.8bn into equities this week, $5.4bn into bonds, $0.2bn into gold.
Belly of the Wall St bull: = credit…now 49 consecutive weeks of IG bond fund inflows; higher spreads + redemptions necessary condition for correction.
BofAML Bull & Bear indicator down to 6.7: was 7.6 end-Oct; immediate correction risk recedes but stock & credit sentiment unambiguously bullish…e.g. BofAML private client equity allocation up to 60.8% (all-time high 62.5% in Mar’15); we continue to believe peak Positioning, Profits, Policy = Big Top in markets.
Fiscal Hare & Monetary Tortoise: key policy trends past 6 weeks…1. noisy US tax reform finally priced-in via value, small cap, bank stock rally; 2. slow but synchronized Fed/ECB/PBoC/OPEC tightening priced-in via reversal in leadership of tech/HY/EM, begins reversal of Fed/ECB/PBoC/OPEC easing since 2016’H1.
Fiscal Hare inflows: biggest financials inflows in 21 weeks ($1.8bn), biggest small cap inflows in 17 weeks ($1.4bn).
Monetary Tortoise outflows: 1st tech outflows in 8 weeks (after historic $6bn past 6 weeks = 4.5% AUM); HY outflows for 5th consecutive week ($0.5bn).
Asset Class Flows
Equities: inflows 23 of past 25 weeks ($7.8bn; $11.7bn into ETFs, $3.9bn outflows from mutual funds)
Bonds: inflows 36 of past 37 weeks ($5.4bn)
Precious metals: 6th straight week of inflows ($0.2bn)
Equity Flows
US: largest inflows in 5 weeks ($4.3bn)
Japan: first outflows in 5 weeks ($0.1bn)
Europe: modest inflows ($0.9bn)
EM: inflows for 35 of past 37 weeks ($1.6bn)
By style: largest US small caps inflows in 17 weeks ($1.4bn), moderate inflows to US growth ($0.6bn), 6th straight week of outflows from US value ($0.7bn)
By sector: inflows to financials ($1.8bn, highest in 21 weeks), consumer ($0.7bn, highest in 12 weeks); outflows from tech ($14mm), energy ($0.3bn), materials ($0.3bn, largest in 19 weeks), utilities ($0.3bn), healthcare ($0.4bn), real estate ($0.7bn)
Fixed Income Flows
49 straight weeks of IG bond fund inflows ($5.6bn) 5th straight week of HY bond fund outflows ($0.5bn)
EM debt inflows 42 of past 44 weeks ($0.8bn)
Small muni funds inflows ($0.2bn)
Largest outflows from govt/Tsy funds in 4 weeks ($1.0bn)
Small TIPS inflows after massive week prior ($54mn)
First bank loan inflows in 5 weeks ($0.1bn)