Synchronized Swimming (We’ve Only Seen This Once Since 2004)

The “it’s all one trade” meme has become ubiquitous in 2017.

Indeed, there are so many riffs on it that the number of ways to express the sentiment that “it’s all one trade” simply reinforces the notion that… well… that it’s all one trade.

That of course is great when things are going well. When vol is artificially suppressed, sentiment is good, and the global economy is in that “sweet” spot where growth is just good enough to keep investors’ spirits up but not good enough to send central bankers scrambling to tighten in a mad dash to dodge the “behind the curve” allegations, all is well.

If you needed further evidence that we’ve reached some kind of zombified, “just buy it all because why not?” stupor, look no further than the following charts which show that not only are inflows to all assets tracking close to an all-time high, but these inflows are synchronized in a way we’ve seen only twice in a decade across assets and only once since 2004 in equities.

Via Citi

Inflows to all assets amount to $368bn YTD, close to 2012’s all-time high, according to EPFR. Annualised they’d be close to $1tr (Figure 1).

Flows1

Synchronised inflows into equity, bonds and MM funds have happened only twice in the last 10 years. YTD equity funds globally have attracted $127bn (0.9% of AUM) and bonds $225bn (3.6% of AUM). This explains positive returns across all assets classes this year, similar to other two synchronised inflow years of 2014 and 2007 (Figure 2).

Flows2

2017 is on track to be the first year of synchronized equity inflows to all major region funds since 2004. The largest inflows as % of AUM were to EM ($27bn or 2.4% of AUM) and Japan ($22bn or 5.7% of AUM) funds. Flows into US funds amounted to $13bn (0.04% of AUM), and Europe $12bn (1.0% of AUM).

Flows34

And the reason this works out for investors is as simple as it ever was…

CBBS

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