The Flows
Great Rotation: huge weekly equity inflows ($21bn = 9th largest ever), bond outflows ($4.4bn = 7th consecutive week), cash outflows ($11bn), gold outflows ($0.7bn).
Melt up: $63bn inflow to equities since election vs. $151bn outflows Jan-Oct.
Rally starts: The rally started in Feb. 2016 with a. bearish Positioning (BofAML Bull & Bear indicator = 0, cash = 5.6%, UW’s in EM & energy >2SDs), b. bearish Profits (PMI’s crashing toward 45, global EPS negative), c. Policy impotence (“Quantitative Failure”).
Rally ends: The rally ends (correction likely Feb-April’2017) with a. bullish Positioning (BB index = 8, cash around 4%, OW’s in stocks, Japan & banks >2SDs), b. bullish Profits (global PMI’s >55, US wage growth >3%), c. Policy hawkishness (Fed/macro jacks up short end of yield curve).
* Asset Class Flows
Equities: $20.7bn inflows (9th largest week on record; note $31bn ETF inflows vs $10bn outflows from mutual funds) Bonds: $4.4bn outflows (7 straight weeks = longest streak in 3 years)
Precious metals: $0.7bn outflows (5 straight weeks)
* Equity Flows
- EM: $1bn inflows (largest in 7 weeks)
- Europe: $0.7bn inflows (only 8th week of inflows YTD)
- Japan: modest $0.7bn inflows
- US: $18.5bn inflows
By sector: 12 straight weeks of financials inflows ($0.6bn), 6 straight weeks of REITs outflows ($1.2bn)
* Fixed Income Flows
- Inflows to TIPS 25 of past 27 weeks ($0.3bn)
- 6 straight weeks of outflows from EM debt funds ($1.2bn)
- 5 straight weeks of inflows to bank loan funds ($1.5bn)
- Largest inflows to HY bond funds in 9 months ($4.7bn)
- Largest outflows from IG bond funds in 21 weeks ($4.7bn)
- 7 straight weeks of outflows from muni bond funds ($2bn)
- Moderate outflows from Govt/Tsy funds ($1.9bn)