Sell Bonds Buy Stocks continues again according to recent data from a big bank

US equities have once again regained the popular vote, but despite US equity inflows hitting a multi-year high, equity funds have cut exposure back to a neutral weighting following the US elections.

Investors Continue To Sell Bonds Buy Stocks

According to Deutsche Bank’s weekly US investor positioning and flows report published at the end of last week, inflows into US equities amounted to $4.4 billion last week, marking the fourth straight week of inflows cumulatively adding $45 billion into equity funds. This is the longest consecutive stretch of inflows since June 2014.

These inflows are in line with the Deutsche’s macro data surprise index, MAPI, which reached a 4- year high this week, reflecting the unfolding V-shaped recovery from the dollar shock.

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As equity funds have benefited from the improving economic outlook, bonds have suffered as is typical with improving growth and rising rates. $4.4 billion has moved out of bond funds over the past week according to Deutsche’s research while inflows returned to high yield and outflows from investment-grade and emerging market funds stopped. Rate sensitive funds reported the bulk of outflows.

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Sell Bonds Buy Stocks

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Back in the equity space, after raising equity exposure to a modest overweight following the US elections, equity funds have since cut exposure back to neutral. While it is not clear why exactly funds have chosen to reduce equity exposure, Deutsche speculates that improving economic data will see funds raise equity exposure to overweight once again in the near-term.

Other positioning data contained within the Deutsche report shows that heading into the OPEC meeting, net long positions were very low relative to history. Rather than reflecting a drop in long positions these figures highlighted the fact that gross shorts were near all-time highs heading into the meeting. Gross longs were also elevated priming the market for a sudden short squeeze if OPEC surprised to the upside, which is exactly what happened. Short-covering was likely the main driver of the rally post the OPEC supply cut agreement.

Meanwhile, mutual funds continued to underperform their benchmarks last week despite the wider market rally. Those mutual funds monitored by Deutsche are overweight Energy and Materials, and underweight Consumer Discretionary and Defensives ex Healthcare. Long-short equity hedge funds are overweight Industrials, Financials, Materials and Healthcare and underweight Staples, Tech, Telecom and Utilities.