Ringing The Bell On Record Stock Inflows: Long Onlies See Biggest Outflow Since March 2020 Crash

When it comes to equity market fund flows, the one defining feature of 2021 was the unprecedented reversal of years of outflows (or stagnant inflows), culminating in a record flood of new money entering equity funds as retail investors awoke from their decade-long hibernation (with the help of trillions in stimulus).

But with stocks now entering a period of extended turbulence coupled with violent drawdowns (at least until the Fed's new put strike price emerges) now that the Fed has again ushered in a rate hiking cycle, the relentless avalanche of fund flows is finally starting to ebb.

According to the latest EPFR data compiled by BofA's Michael Hartnett, last week saw the largest "flight to safety" inflow to Treasuries since July 2020, for $3.6 billion, the largest outflow from IG bonds since Mar 2021 ($6.4 billion); as well as the largest monthly outflow from HY & EM bonds since April 2020, amounting to $2.9 billion.

Most importantly, last week also saw the largest outflow from long-only developed market equity funds since April 2020 at $26.0 billion, a clear signal that sentiment may have peaked.

This was curiously offset by the largest inflow to tech since February 2021 at $4.4 billion (which makes some sense since tech is really just a long-duration instrument); as well as the largest inflow to consumer stocks since December 2020 at $2.5 billion.

That said, as Goldman further breaks down the flow data, net flows into all global funds reversed in the week ending Dec. 15 (+$32 billion vs. +$11 billion the prior week) due to a surge in demand for US-dedicated products. As shown in the chart below, global equity inflows excluding US-dedicated products were negative. Net selling of EM benchmark products accelerated, while outflows from Western European shares moderated.

Finally, while money market cash has continued to rise in recent weeks (despite repeated predictions that the money on the sidelines will enter the stock market), it remains a relatively small fraction of global equity market cap.