>>> Asset Class Flows
* Equities: $3.8bn inflows (first inflows in 4 weeks; all via ETF’s)
* Bonds: $10.1bn inflows (largest since Oct’14) (Table 1)
* Precious metals: $0.9bn inflows (2 straight weeks)
* Money-markets: $7.7bn outflows
>>> Equity Flows
* Europe: strongest inflows ($5.1bn) since Dec’13 (Table 2)
* EM: first inflows in 11 weeks ($0.4bn)
* US: $3.3bn outflows (4 straight weeks)
* Japan: first outflows in 4 weeks ($0.4bn)
>>>Fixed Income Flows
* 58 straight weeks of inflows to IG bond funds ($4.8bn)
* $3.5bn inflows to HY bond funds (largest since Oct’13)
* 8 straight weeks of outflows from EM debt funds (albeit a small $0.2bn)
* 29 straight weeks of outflows from bank loan funds ($0.3bn)
* 19 straight weeks of inflows to muni funds ($0.9bn)
* 15 straight weeks of inflows to MBS funds ($0.5bn)
Talking Points
* ECB risk-on: “risk-on” flows post ECB QE announcement; investors reduce cash ($8bn outflows) to fund buying of equities ($4bn inflows) & bonds ($10bn inflows)
* Risk-on winners: biggest European equity inflows since Dec’13 ($5.1bn – Chart 1); largest HY inflows since Oct’13; 1st week of EM equity inflows in 11 weeks
* Gold-on: largest 2-week inflows to precious metal funds since Sep’12 – Chart 5; gold back in fashion following brutal break of Swiss franc-euro peg
* GWIM flows: while broad flow data shows inflows to both bonds & stocks past 12 months, our GWIM flows show inflows to stocks & outflows from bonds (Chart 4)
* GWIM AA: retail asset allocation to stocks is at historically high levels (Chart 2)
* GWIM duration: while bond allocations have dropped, retail clients have extended the maturities/durations of corporate bond holdings; their yield-seeking, risk-on stance has been driven by greater conviction in the lower-for-longer interest rate forecast (Chart 3)
* 2015 YTD global total returns: stocks flat, bonds flat, commodities -8%, USD +5%.
We remain bullish volatility, our favored Q1 asset: event risks in energy, credit, EPS high post-ECB; financial stress, US GDP/EPS growth stumble, or Europe failure to respond to lower oil/currency/rates would initiate large risk off asset allocation in next 6 weeks.
* Lose-lose for risk: if growth disappoints Q1...investors say "policy failure"...volatility up; if growth up...Fed hike expectations...volatility up.
* SPX vs. Fed: risk that "equity vigilantes" push SPX lower in coming weeks to force Fed into dovish March FOMC (when Fed widely expected to drop mention of "considerable time" from statement).