“OK macro report” Signals Bullish Stance on Equities

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There has been a 180 degree turn on the ‘risk off’ stance investors have held to in the last couple of months as they piled over one and a half billion dollars into the equity markets in the week ending June 1st.

TOKYO, JapanJune 21, 2016PRLog — The turnaround marks the first net inflows for several weeks as U.S. stocks attracted renewed interest, making up the bulk of the inflow with around $ 1.1 billion according to Bank of America Merrill Lynch (BAML).

The current bullish sentiment is being attributed mostly to an “okay macro report” although a recent rally in financials, and crude bouncing back, have also played a part.

The rest of the inflows were made up of emerging market equities with around $ 400 million.

BAML reported that U.S. stocks were a tiny amount under their record highs, with a 1.6 per cent climb in the S&P 500 last month.

U.S. May ISM numbers are running right alongside these levels at about 2,160.

Financials enjoyed their most substantial inflows since 2015, with $ 500 million being added. Meanwhile, tech stocks saw over a hundred million inflow, a two month high.

Mutual funds showed exactly the opposite performance to ETFs however, with the former seeing a $ 5 billion outflow in contrast to a $ 7 billion inflow for ETFs.

Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management commented on the BAML findings in a phone interview this morning.

“With mutual funds what we see is a very delicate investment landscape due to a number of factors. There has been increased involvement from regulators, decreased liquidity, low confidence, overcrowding and some strange outcomes from the negative interest rate policies recently,” Poulson said.

In response to the Greece bailout issue and possibly the upcoming Brexit vote, European equities have been on a four month slide with a further $ 600 million in outflows occurring last week. Most of the hard work from the first decade of the millennium seems to have been completely undone, especially taking into account nearly $ 50 million worth of redemptions from Asia ex-Japan equity funds.

Poulson continued, “The potential Fed rate hike is just one of several landmines in the road for investors as shown in the BAML data. Uncertainty in Europe is at an all-time high and caution is advised. It’s an okay macro report in general but we need not get carried away.”

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