Key takeaways
* Alpha in bonds; inflows to active funds continue to outstrip passive
* AIpha in stocks: first ETF where stocks selected by robots launches amidst biggest Tech inflows in 38 weeks
* Tick-tock: risk-on equity & bond flows push B&B indicator up to 7.6
Talking Points
* Equities winning: $8.8bn into equities, $5.8bn into bonds, $0.4bn outflows from gold.
* Passive losing...in Bonds: $3.6bn into active bond funds this week vs $2.2bn into bond passives…active AUM fighting back in bondland...$1.04tn active bond inflows past 10 yrs vs. $0.93tn into passives (Chart 1)...v different trend past decade in stocks (Chart 2).
* Yield winning: $6.3bn inflows to IG+HY+EM bonds this week; investors continue to discount low-rate environment...US 5s30s yield curve (88bps) flattest since GFC... remarkable given the Philly Fed Employment outlook hit a 50-year high today (Chart 3).
* Japan losing (for a change): record $4.4bn outflows from Japan equities (86% ETF redemptions, possibly via BoJ); in contrast solid week of $7.5bn US equity inflows; post Sunday election we expect Japan TOPIX to revert to tracking US bond yields (Chart 4).
* Robots winning: this week's launch of the 1 ETF in which stocks will be selected by robots (AIEQ) comes as tech funds see biggest inflows in 38 weeks; AIEQ outperforming SPX thus far.
* GWIM ETFs: YTD flows show decisive cyclical shift by private clients, buying bank loans, financials, EAFE ETFs, shunning quality, utilities, large caps & dividends (Chart 6).
* BofAML Bull & Bear: BofAML B&B @ 7.6 as equity & bond flows, FMS equity & cyclical sector OWs push indicator toward "sell" signal of 8 (Chart 12)...tick-tock, tick-tock.