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* Note divergence between relative performance of HY vs IG and S&P 500 ...either HY rallies or stocks soon in a bit of trouble
* Our B&B Index continues to suggest more greed than fear in financial markets (current reading of 7.3 close to 8.0 threshold to trigger a contrarian “sell” signal
* BofAML private client allocation to equities currently 61%, a 9-year high, while bond (24%) and cash (11%) allocations at 9-year lows...also indicates correction risks rising
* Geopolitics a potential catalyst but for decent correction rate volatility needs to rise
* Weekly flows show inflows to equities ($6.2bn) outpace inflows to bonds ($3.5bn). But the reverse is true year-to-date with $81bn into equity funds and $112bn into bond funds
>>> Asset class flows
* Equities: $6.2bn inflows (all inflows via ETF’s – SPY, MDY, FTSE China A50, QQQ)
* Bonds: $3.5bn inflows (4 straight weeks) (Table 1)
* Commodities: $0.4bn inflows (4th straight week)
>>> Equity flows
* EM: $1.1bn inflows (6 straight weeks); 4-week inflows as % of AUM = 0.5% (threshold for contrarian “sell” is 1.5%)
* Europe: outflows in 3 out of past 4 weeks ($0.3bn) following a record 47 straight weeks of inflows from Jul’13 to May’14 = region falling out of favor
* US: $2.5bn inflows (divergence between $4.7bn into ETF’s and $2.2bn outflows from long-only funds)
* Japan: flat
>>> FICC flows
* Largest weekly outflows ($2.7bn) from HY bond funds since Aug’13 (Chart 4)
* 30 straight weeks of inflows to IG bond funds ($4.7bn)
* 16 straight weeks of inflows to EM debt funds ($0.9bn) (largest in 6 weeks)
* 2 straight weeks of inflows go Govt/Tsy funds ($0.9bn)
* Outflows from floating-rate debt funds in 13 out of past 14 weeks ($0.3bn)