(BofA-ML) The Flow Show : Risk-Off, Bounce-On

Asset class flows
- Equities: $10.1bn outflows (largest outflows in 8 weeks; majority via ETF’s – SPY, QQQ, XLE, RTY) (Table 1)
- Bonds: $9.1bn inflows (largest in 6 weeks) (Caveat: PIMCO’s fund flow activity not captured in EPFR’s weekly database so magnitude of overall bond inflows is very likely overstated)
- Precious metals: $0.4bn outflows (6 straight weeks)

Equity flows
- EM: ekes out small $79mn inflows (only region to see inflows) (Table 2)
- Europe: $1.9bn outflows (5 straight weeks)
- US: $9.6bn outflows
- Japan: $0.5bn outflows
- By sector, huge $2.2bn out of Energy funds

FICC flows
- 41 straight weeks of inflows to IG bond funds ($10.4bn) (Chart 4)
- 5 straight weeks of outflows from HY bond funds ($3.7bn) (largest in 8 weeks)
- 12 straight weeks of redemptions from floating-rate debt ($1.2bn) (largest in 8 weeks)
- First outflows in 6 weeks from EM debt funds ($0.4bn)
- 12 straight weeks of inflows to MBS funds ($1.6bn)

* "Risk-Off" but not "Panic-On": inflows to Bonds ($9bn), outflows from Stocks ($10bn); rotation rather than carnage within Fixed Income (though weekly flow data do not account for PIMCO outflows); investor sentiment more bearish but not Max Fear according to BofAML Bull & Bear Index (5.2 is mid-range – Chart 1); fits with European client feedback this week...cash has been raised, beta has been cut, and "buy on dip" mantra for risk assets morphing into "sell into strength"

* "Junk-Off", "Quality-On": big $3.7bn outflows from High Yield, but outflows not larger than the 2014/2013/2011 capitulations (Chart 2); and bigger inflows to Investment Grade & MBS indicate rotation within bonds rather than a "credit event"

* "Oil-Off": largest weekly outflows ever from Energy funds on absolute terms ($2.2bn – Chart 3); capitulation as rip in US dollar forces oil prices down; oil prices biggest victim of lower liquidity-lower growth scenario (increasingly discounted by
investors as shown by collapse in US/EU inflation expectations).