LONDON (Reuters) – A $10 billion wipeout over the last week has compounded the worst start to a year for equity flows since 2008, Bank of America Merrill Lynch strategists said on Friday.
Citing data from flow-tracker EPFR, BAML’s analysts calculated that just over $60 billion has now been yanked out of equities this year. Almost $80 billion has been pulled from developed markets, while $18.5 billion has gone into emerging markets.
They added that last week also saw the fourth-biggest inflow on record into ‘investment grade’ bonds at $9.5 billion and that “Europe = Japan” – a reference to long-term aneamic growth and low interest rates – was now the most consensus trade in the world by their calculations.
“Europe = Japan is correct and consensus,” they said, though they also reckon European assets will outperform in the second quarter now that the European Central Bank has shifted back towards stimulus and there are signs of renewed growth emerging from China.
For many, the monster outflows from stocks will appear at odds with what has been a red-hot start to the year for equity markets.