Investment Fund Outflows Dominate

The most recent flow data for ETF's and mutual funds reported by ICI last week notes outflows occurred in nearly all of the broad asset categories. One exception was a small positive flow into commodity oriented investments.

 Source: ICI

Following the large $18.6 billion bond investment outflow for the week ending 10/31/2018, bond investments continued to be sold by investors. Below investment grade bonds bore the brunt of this late October outflow.

The below chart displays the 1-month rolling sum of ETF and mutual fund flows. For most of the two years shown, domestic equity funds experienced outflows. Until mid year this year, international equity funds were beneficiaries of inflows. The green chart in the bottom pane shows the recent bond outflows. For the most recent week Refinitiv/Lipper Alpha Insights noted  fund investors favored money market funds to the tune of +$5.0 billion for the week ending 11/28/2018.

This risk off investor activity is occurring at the same time the CNN Business' Fear & Greed Index is at an extreme fear level. The latest reading of 11 is approaching the level recorded earlier this year during the late January into February market decline.

The equity market's price action and technical picture is certainly not rewarding investors who are long the market as the month of December approaches its midpoint. The earnings picture and economic backdrop are suggesting a more favorable environment as one looks to 2019 though. A couple of good article links reviewing the current market and economic data are listed below.

 

Disclosure: None.

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Moon Kil Woong 3 months ago Contributor's comment

This is ok as long as it doesn't snowball. In reality its a warning to the powers that be that there is consequences to their actions. If rectified the US should continue its run. If not or if things get work the yield curve inversion will happen and the Fed can't cut rates because inflation will prevent it.