When looking at the latest weekly fund flows, it is clear that the Trump trade is over if only for the time being. As BofA reports, citing EPFR data, the last week saw the largest precious metal inflows in 5 months ($1.3bn), the 4th consecutive week of bond inflows ($4.5bn), and a week of modest $1.7bn equity inflows, however US stocks saw $2.5 billion in outflows, representing the 4th weekly outflow in the past 5 weeks.
Some highlights from BofA's Michael Hartnett:
Election to Inauguration flows: since the US election, BofAML GWIM ETFs show private clients big buyers of Financials, Materials, Bank Loans, Industrials, TIPS, Value; big sellers of Low-Volatility & Precious Metals
Inauguration reversals: EPFR flows show partial profit-taking in these Trump reflation trades into the inauguration…1st outflows from financials in 17 weeks, 1st government bond inflows in 6 weeks (largest in 6 months), and 1st inflows to precious metals in 10 weeks; we also note 1st outflows from HY funds in 8 weeks; but we also see ongoing inflows to “inflation trades” of materials, TIPS, and (in particular) bank loans; so a “pause” in the Davos Man to Joe Six Pack rotation rather than major reversal
Post-inauguration tactics: meanwhile our Global Flow Trading Rule, which had flirted with a “sell” signal mid-Dec’16, has pulled back from the abyss (inflows to equities & HY currently below the 4-week “sell” threshold of 1.0% of AUM, and global PMIs continue to trend higher
Stick with Icarus Trade: our BofAML Bull & Bear Indicator also indicates more bullish sentiment (up to 3-month high of 4.9 - Chart 2) but remains some way below “sell” trigger of 8.0; Positioning, Profits & Policy make us stick with our Icarus Trade view… any Jan/Feb wobble to be followed by one last 10% melt-up in stocks & commodities in H1 before visible investor “hubris” on macro & markets signals the “Big Top”
And the details:
Asset Class Flows
- Equities: $1.7bn inflows ($1.7bn mutual fund outflows vs $3.4bn ETF inflows)
- Bonds: $4.5bn inflows (4 straight weeks)
- Precious metals: first inflows in 10 weeks ($1.3bn – largest in 5 months)
Fixed Income Flows
- First outflows from HY bond funds in 8 weeks ($0.3bn)
- First govt bond inflows in 6 weeks ($1.0bn – largest in 6 months)
- 4 straight weeks of IG bond inflows ($2.2bn)
- 10 straight weeks of inflows to bank loan funds ($0.7bn)
- 6 straight weeks of inflows to TIPS funds ($0.3bn)
- 3 straight weeks of inflows to EM debt funds ($0.4bn)
Equity Flows
- Japan: strong $2.5bn inflows
- Europe: $0.7bn outflows (largest in 6 weeks)
- EM: small inflows of $64mn (2 straight weeks)
- US: $2.5bn outflows (outflows in 4 of past 5 weeks)
- By sector: first outflows from financials in 17 weeks ($0.7bn); first outflows from tech in 6 weeks ($0.1bn); inflows to energy in 6 of past 7 weeks ($0.4bn); inflows to materials in 10 of past 11 weeks ($0.2bn)