Investor Flows – Buy Big, Sell Small

Last week investors shunned equities away from plain-vanilla, large cap equity indices. Demand for global exposure persists, but has become almost exclusively of the European variety.

On a rolling one-month basis, investors have sent 77 cents of every dollar into equities. Longer-duration governments have caught some wind along with aggregate bond strategies. Corporates and precious metals have yet to see demand return.

The balance between equity and high-quality fixed-income flows has shifted to nearly neutral. Fervent risk-on flows reached a pinnacle in mid-March just as US Treasury yields peaked.

Most surprisingly, investors have begun selling inflation-friendly assets as a whole. Only TIPS continue to command inflows on a rolling one-week basis near $0.51 billion. Energy, industrials, materials, real estate, and commodities were all in the red last week. Remember investors’ had a seemingly unquenchable thirst for these assets since Biden’s election in November 2020.

Governments away from the long-end remain out of favor as headlines of potential tapering and distant rate hikes dominate. 

Corporates continue to see neither buying nor selling while yields and spreads grind to fresh lows.

Investors’ have become squarely focused on European equities, while beginning to shed exposure to Asia Pacific. 

ADDENDUM

 

 

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