Global investors pour money into stocks for the first time in months

With the Dow Jones Industrial Average on track Friday to snap the longest weekly losing streak in nearly a century, data from a handful of sources shows investors around the world have retreated to the equities, prompting the first net inflows into global equities. in 10 weeks.

Investors invested $20.6 billion in global equity funds during the week of May 25, according to Bank of America’s weekly “Flow Show” report, which uses fund flow data from Emerging Portfolio Fund Research, as well as the megabank’s own data.

An illustration of these flows can be found in the graph below, which comes courtesy of Bank of America.

Bofa Investment Strategy, EPFR

The flows come as global stocks finally rebound this week after the S&P 500 index flirted with bear market territory last Friday. Major benchmarks in Europe and the US are heading for their best weekly performance since March, and the MSCI World index is up more than 3% so far this week, paring its loss since the start of the month. year at about 15%.

As stocks rebounded, market strategists from Citigroup and JP Morgan told clients they expected a sustained rebound, but other investment firms maintained a more cautious approach, Bank of America and Morgan Stanley warning that stocks may not have bottomed for the year yet. .

According to Bank of America’s Michael Hartnett, the most oversold assets relative to their 200-day moving averages include 30-year US Treasury bonds, junk bonds and stocks in China and Germany. Chinese stocks have also been beaten so far this year, with China’s Shenzhen index falling nearly 25% year-to-date.

It should be noted that Hartnett has been one of the more pessimistic strategists on Wall Street in recent months, alongside Morgan Stanley’s Michael Wilson.

Meanwhile, the Bank of America bullish indicator remained in “unambiguous contrarian buying territory” for the second week in a row. The index crashed from 1.5 to 0.6 over the past week, indicating extremely bearish positioning, although this data is reported with a slight delay. In comparison, the bullish-bear gauge was near 10 a year ago.

Bank of America

Similar data from Lipper Refinitiv also showed the first net inflows into global equities since April, with global investors buying $6.16 billion worth of global equity funds in the week ended May 25.

Data from Jefferies equity research also showed strong inflows into equity-focused exchange-traded funds. Retail and institutional investors pumped $15.76 billion into ETFs in the past week, the most in nine weeks, according to the investment bank.

Refinitiv data also showed a net sell-off in bond funds, with investors withdrawing $9.94 billion from fixed-income funds over the past week, marking the eighth consecutive weekly outflow. On the money market fund front, investors bought a whopping $23.13 billion after three straight weeks of net selling.

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