LONDON (Reuters) – Investors plowed a record $12.three billion into funding grade bond funds and ditched equities over the previous week, Bank of America Merrill Lynch stated on Friday, as worries over commerce tensions and the world financial system strengthened a run for safe-haven bets.
Bond funds general pulled in $17.5 billion in the week to Wednesday, their second largest week of inflows on record, the financial institution stated citing EPFR knowledge. Bond funds have attracted $183 billion because the begin of 2019.
An “investor capitulation into government bond funds” noticed sovereign securities draw in their second largest inflows ever at $eight.9 billion, BAML stated.
Meanwhile fairness funds suffered $10.three bln of outflows with year-to-date outflows amounting to $155 billion. Across sectors, tech-oriented fairness funds misplaced $1.1 billion, their largest weekly outflows this yr, whereas funds targeted on defensive shares such as shopper, actual property and utilities all loved inflows.
Chief funding strategist Michael Hartnett stated three dangers have been looming giant on the horizon.
“#1 Trump opts to be “Tariff Man” not “Jobs President,” inflicting recession; #2 Powell cuts ship Fed into the coverage impotence membership with ECB & BoJ; #three Occupy Silicon Valley insurance policies threaten U.S. macro & market management,” Hartnett wrote, referencing the 2011 “Occupy Wall Street” protest – a backlash towards monetary inequality and the wealth of the most important U.S. monetary establishments in the wake of the monetary disaster.
The wider risk-off temper additionally weighed on rising market belongings which suffered outflows of $2.1 billion on the fairness aspect, in a seventh straight week of losses, and misplaced $700 million on the debt aspect, BAML discovered.
The financial institution’s “Bull & Bear” gauge has fallen to 2.5, indicating cross-asset positioning is bearish, it added.
Reporting by Karin Strohecker; Editing by Virginia Furness and Susan Fenton