Nobody Believes This Market: 2019 Is Now the Worst Year for Stock Outflows since 2008
The comments below are an edited and abridged synopsis of an article by Tyler Durden
For the past two months, there has been one of the greatest paradoxes of this market in 2019: Even as stocks went higher, having almost wiped out their Q4 losses, investors were in liquidation mode, selling stocks and pulling money out of equity funds for 12 consecutive weeks.
Who is right, then: the market, which has risen above the critical 2,800 level (if only briefly), or investors, whose boycott suggested that few had any trust in the biggest market rally to start the year since 1987?
Now that the market appears to have reversed and the rally is over, with technicians predicting that a retest of the December lows is underway, it appears that those who sold as stocks rose were correct.
One week after it seemed that bearish investors had finally quit, with a modest inflow into US equity funds, EPFR reported that the latest week saw another $10.1 billion equity outflow, with the US seeing about half of this, while inflows into fixed income accelerated.
Stock outflows have entered historic territory, and 2019 is now the worst start for equity outflows since 2008. The question is whether lightning will strike twice, and the same financial Armageddon that hit in 2008—when investors pulled some $100 billion from stocks in the first 10 weeks—will strike again this year.
And while equity outflows may be the largest in 11 years, something that does not jive with market action year to date, we have another historic anniversary: The bull market is 10 years old, with the market cap of US stocks up $21.3 trillion, or 3x the rise in US GDP of $6.5 trillion.
While the US remains a case study of how a central bank should inject trillions into its market, if not economy, the rest of the world remains lacking, and the Eurozone is trapped in a deflationary period of growth and interest rates, with EU rates unlikely to rise and EU equities in a value trap.