In­vestors flee bonds and stocks

Arab News - - Business - Reuters

send­ing mar­kets spi­ral­ing fur­ther as in­vestors pre­dicted a wors­en­ing of re­la­tions be­tween the world’s two big­gest economies.

The anx­i­ety drove in­vestors to pull $5.2 bil­lion from eq­uity funds and $8.1 bil­lion from bond funds, ac­cord­ing to EPFR data cited by BAML. “Mar­kets start­ing to price in re­ces­sion, but pol­i­cy­mak­ers yet to price in re­ces­sion,” ar­gued the BAML strate­gists.

Eq­uity out­flows were made up of op­po­site flows in ETFs and mu­tual funds, with $5.3 bil­lion driven into ETFs while $10.5 bil­lion was taken out of mu­tual funds.

But in­vestors were con­tin­u­ing to edge back into emerg­ing mar­ket stocks, which saw their eighth week of in­flows with $2.7 bil­lion.

This helped to push BAML’s “Bull & Bear” in­di­ca­tor of mar­ket sen­ti­ment up from 2.4 to 2.7 — “not yet an ex­treme bear­ish read­ing,” BAML strate­gists said.

The start­ing point for a fall to lower eq­uity al­lo­ca­tions is high, they pointed out, with the world’s largest sovereign wealth fund at 67 per­cent eq­uity al­lo­ca­tions.

Hedge funds are still at a net 35 to 40 per­cent net long, and BAML’s fund man­ager sur­vey shows cash lev­els un­der 5 per­cent.

The global con­sen­sus fore­cast is for 8.3 per­cent growth in earn­ings-per­share in 2019, which the strate­gists said was too high, pre­dict­ing a “Big Low” in mar­kets next year.

Traders work on the floor of the New York Stock Ex­change. US bond move­ments this week trig­gered fears over global growth.

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