Investors Are Seeing Red As Redemptions Hit Record High

It seems investors are becoming increasingly fed up with underperforming equity strategies, so redemptions continue to climb. To quantify just how poorly the equity market has performed this year, Bank of America Merrill Lynch estimates that the global combined equity market cap has shed $15.7 trillion in value since peaking on Jan. 26.

The firm’s data indicates that overall redemptions hit a new record high earlier this month. In fact, the turmoil is spilling over from equities into other markets, which means equity funds aren’t the only ones seeing tremendously high redemptions this month. We’re also seeing a very interesting trend in credit when we combine this new data from BofAML with other recent findings from other sources.

Record-high redemptions

BofAML Chief Investment Strategist Michael Hartnett and team released their latest "Flow Show" report toward the end of last week, and they observed some interesting trends. They gave the U.S. dollar a score of 5.3% and cash a score of 1.7%. Meanwhile, the scores on bonds and equities were all in the red. Government bonds were at -2%, while high-yield bonds were at -2.1% and investment-grade bonds earned a score of -4.3%. Global equities scored -5%.

Interestingly, they said cash has been outperforming equity and bonds, and the last time that happened was in 1994. Moreover, the last times cash returns were positive while equity, credit and government bond returns were all negative takes us all the way back to 1969.

Equity outflows reached a record high of $39 billion, while investment-grade bond outflows were at $8.4 billion. The week also marked a record high for equity and bond redemptions. U.K. equity funds recorded record-high redemptions at $9.8 billion, while U.S. equity funds saw their second-highest level of redemptions on record at $27.6 billion.

BofAML also reports that redemptions from financials were at their fourth-highest level ever at $2.1 billion. The firm adds that U.S. banks relative to the S&P have totally unwound the Trump election bull case.

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