>>> Asset Class Flows
* Equities: $3.5bn outflows (3-week outflows = $24bn) (note $5.1bn mutual fund outflows offset by $1.7bn ETF inflows)
* Bonds: $2.8bn outflows (largest in 4 weeks)
* Commodities: $0.8bn inflows (inflows in 6 of past 7 weeks)
>>> Equity Flows
* EM: $2.3bn outflows (largest in 19 weeks) (12 straight weeks of outflows)
* US: $4.3bn outflows (all via mutual funds)
* Europe: $0.6bn inflows (inflows in 15 of past 16 weeks)
* Japan: $3.0bn inflows (largest in 18 weeks)
* Equity sector flows do question market leadership: funds covering tech, financials, & consumer sectors all record largest weekly outflows in 21 weeks ($3.1bn outflows combined); healthcare also sees largest outflows in 14 weeks.
>>> Fixed Income Flows
* Big $4.9 outflows from HY bond funds (2nd largest outflows in 12 months)
* Chunky $2.3bn outflows from EM debt funds (largest in 20 weeks) (outflows in 23 of 26 weeks)
* 12 straight weeks of outflows from bank loan funds ($0.7bn) (outflows in 24 of past 25 weeks)
* IG bond funds also succumb to $1.0bn outflows
* Huge $5.1bn inflows to Govt/Tsy funds (largest in almost 12 months) 18 straight weeks of inflows to Munis ($0.5bn)
--> Bond flows recessionary: largest inflows to government bond funds in 12 months ($5bn), 2nd largest outflow from HY funds in 12 months ($4.9bn - HY outflows over past 7 weeks = 5% AUM = capitulation), and chunky outflows from EM debt ($2.3bn).
--> Equity flows not recessionary: modest weekly equity redemptions of $3.5bn; equity outflows past 3 weeks = $24bn outflows (= 0.3% AUM)…this pales in comparison to $36bn during Aug'15 sell-off, $90bn during Aug'11 debt ceiling sell-off, $85bn during '08 GFC; flows mirror Jan FMS findings…positioning yet to reveal Full Capitulation.
--> Price action shows policy impotence & Quantitative Failure: since Japan expanded ETF purchases Dec 18th the Yen is +2.9%, Nikkei -16.6%; since ECB cut rates Dec 3rd the Euro is -1.1%, Euro Stoxx 600 -11.6%; and since Fed hiked on Dec 16th the S&P is -9.4%, 2yr yields are -18bps, 10yr yields -29bps. 3P’s say…: lacking true Positioning shake-out, lacking catalysts for Profit turnaround & lacking visible Policy panic, we remain “sellers into strength” of risk assets.