The rise in world stocks this week to fresh all-time highs drew an eighth straight weekly inflow into equity funds, Bank of America Merrill Lynch said, while bond funds also chalked up their ninth straight weekly inflow.
The $8.5 billion equity fund inflow in the week to February 22 pushed BAML’s “Bull & Bear” indicator deeper into bullish territory and closer to levels that generate a contrarian ‘sell’ signal.
For that to happen, however, investors need to reduce their cash holdings a little further and buy more emerging market and high-yielding assets, BAML said.
MSCI’s benchmark world equity index hit a record high of 447.67 points this week, and is up 5.6 percent so far this year. A gain of that magnitude would be its best quarterly performance in over three years.
The Dow Jones Industrials Average has chalked up 10 consecutive record closing highs for the first time since 1987. This has led some analysts to warn that a sharp correction, if not quite on a scale of the 1987 crash, looms large.
U.S. equity funds drew a net $3 billion inflow and European funds drew inflows for the fifth week in a row, the $1.1 billion inflow being the biggest in over a year, BAML said.
So far this year investors have poured $60.8 billion into equity funds, according to BAML and flows tracker EPFR Global. Some $54.3 billion of that has gone into developed market equity funds.
Bond funds pulled in $7.6 billion in the latest week, the ninth consecutive inflow, BAML said. Half of that went to investment grade corporate bond funds, $1.3 billion to HY funds and $1.2 billion to EM debt funds.
The notable exception was Treasury bond funds, which posted a fourth straight outflow, this time of $900 million.
Source: Reuters (Reporting by Jamie McGeever; Editing by Toby Chopra)