>>> Asset Class Flows
* Equities: $2.6bn inflows (first inflows in 4 weeks) (note $4.3bn
* ETF inflows vs $1.7bn mutual fund outflows)
* Bonds: $3.8bn inflows (largest in 12 weeks)
* Precious Metals: $0.3bn inflows (largest in 7 weeks)
>>> Equity Flows
* Japan cracks: $1.6bn outflows (biggest 3w outflows since Nov’14)
* EM is back: first inflows in 14 weeks ($0.7bn)
* Europe defiant: $3.1bn inflows (inflows in 20 out of past 22 weeks)
* US: muted $0.7bn inflows ($2.8bn ETF inflows vs $2.0bn mutual fund outflows)
* By sector, Healthcare: 4 straight weeks of outflows (longest streak since Jan’13); by contrast, Consumer funds see largest inflows in 3 months ($0.9bn)
>>> Fixed Income Flows
* First outflows from Govt/tsy funds in 15 weeks (albeit small $0.1bn)
* $2.6bn inflows to HY bond funds (largest in 8 months)
* $0.4bn inflows to EM debt funds (first inflows in 12 weeks & largest in 5 months)
* $0.5bn inflows to IG bond funds (first inflows in 5 weeks)
* 11 straight weeks of outflows from bank loan funds (albeit tiny $56mn)
>>> Talking Points
Risk-on: equity & bond funds both record inflows for first time in 10 weeks...signals turn
in risk-off sentiment...note BofAML Trading Rules remain in "buy" territory, bar the
Breadth Rule which flipped from "buy" to "neutral" this week (Table 3 & Chart 4).
Junk-on: largest HY bond inflows in 8 months & largest EM debt inflows in 5 months
(Chart 1)...collapse in Fed hike expectations gives oversold junk "yield" a bid.
Quality-off: first outflows in 15 weeks from Government bond funds.
Japan-off: $1.6bn outflows & largest 3-week outflows since Nov’14 (Chart 2)...as faith
in higher US rates/dollar evaporates, as does confidence upcoming BoJ QE weakens yen.
Gold-on: largest inflow in 7 weeks...reflects weaker US$ and QE "policy failure" hedging.
EM-on: first EM equity inflows in 14 weeks...first signs of rotation to "weak US$" plays
Europe-defiant: $3.1bn inflows (inflows in 20/22 weeks)...many clients using Eurozone
as hedge against surprise EM-upside.
US cyclical-on: muted $0.7bn inflows belie divergence between $2.8bn ETF inflows &
$2.0bn mutual fund outflows; ETF inflows all to macro-sensitive, cyclical themes e.g.
QQQ, IWM, XLI, XLY...hints that growth expectations troughing.
Unhealthy: 4 straight weeks of global Health Care fund outflows (longest streak since
Jan’13); by contrast, global Consumer funds see largest inflows in 3 months ($0.9bn).
GWIM resilient: BofAML private clients have added risk in each of the past 4 weeks
(Chart 5); and note 2015 on course to be first year since 2012 that private clients have
bought more common stocks than ETFs (Chart 6).
Consensus is currently: low growth/low EPS/low rates here to stay, but no recession;
trading ranges hold (SPX 1850-2050, GT30 2.8-3.2%, DXY 93-100); sell rallies into
strength; own (sensible) growth, (safe) yield, (high) quality; rent
EM/resources/commodities.
Contrarian trader: FMS/flows argue for rotation to "weak dollar" plays e.g. CRB, EM
resources/FX, industrials; breach of SPX 2050 requires ECB/BoJ to boost growth
expectations without FX devaluation.