Now this is what you call a boom, or was that a warning bell we just heard asking how long can the stampede continue?
According to Bank of America (BofA) analysts, investors around the globe have, in the five months since last November, invested more in equities than they did in the previous 12 years!
In its weekly report on investor money flows on Friday, BofA said a record $US576 billion has flown into equity funds since November — more than the $US452 billion seen in the last 12 years combined, all thanks to ultra-easy monetary policies and unprecedented stimulus from governments and central banks.
Up to mid-March the bank said investors are pushing tens of billions of dollars a week into equity funds in what looked like a stampede but that seems to have stopped suddenly in the past three weeks.
The analysts said that a then record $US58 billion flowed into equity funds in the first week of February alone, with another $US46 billion plus flowing in two weeks later. But a new record amount – $US68 billion – flowed into funds in the week to March 17.
The next week (ending March 24) saw an about face from global investors as their charge into slowed sharply as they pushed $US60 billion into cash management funds, the largest amount since April 2020, when COVID-19 was spreading quickly.
That was a first hint that some investors are getting worried about the sustainability of high share prices.
And in the week to March 31 data from another tracking group, Refinitiv Lipper showed US money market funds received a net $US50.35 billion in the week to March 31, after the more than $US60 billion inflow in the previous week
By way of contrast the stampede into equity funds slowed to a saunter with just $US4.62 billion being invested in the final week of March bond fund inflows in the same week topped $US8 billion.
There’s talk of growing fears of a pullback from these record highs (The Dow and S&P 500 hit more record closes on Friday) given valuations are at the highest since the dotcom bubble of the late 1990s, with the S&P 500 trading at nearly 22 times forward earnings.
Those fears are accelerating – investors have pushed $US120 billion-plus into cash funds in the last three weeks. These funds pay very low rates of interest so far funds to park their money in these types of funds shows the level of concern and the desire for safety.
These fears have risen since the implosion in the Archegos private funds that left Credit Suisse, Nomura and other banks with big losses.
But equity asset allocations are still at a record 63.6%, according to BofA. In contrast, just over $US112 billion has gone into bond funds so far this year.
Deutsche Bank said last week it expects a 6% to 10% pullback on Wall Street over the next three months as economic growth peaks.
Sentiment among small investors is also very bullish (a sell sign?). The latest survey by American Association of Individual Investors (AAII) showed retail investors are their most bullish in the past three years, according to Reuters.
“Sentiment is in very worrisome territory as is valuation, yet money flows continue to push indices higher,” said Tobias Levkovich, Citi’s chief U.S. equity strategist in a quote for Reuters.
