Equity funds gathered another $15.6 billion in the week through April 7, adding to an astonishing post-US election haul.
Over the past five months, inflows totaled nearly $570 billion.
Absent context or any reference point, you might be inclined to just call that a “big number” and go on about your day. However, as BofA’s Michael Hartnett observed, that’s $100 billion more than global equity funds took in over the past dozen years.
In Q1, funds enjoyed a record $372 billion in uninterrupted inflows (figure below).
It was the largest equity inflow as a percentage of AUM in nearly 15 years.
This hardly makes up for the longer-term trend. Since the financial crisis, bond inflows have more than doubled equity inflows on net, and that’s including the massive haul for stock funds since November.
BofA’s private clients’ allocation to stocks sits at nearly 64%, a record, Hartnett said, in the latest edition of his weekly “Flow Show” series (figure below). ETF flows show a preference for energy, banks, materials, high yield and value. In other words: A pro-cyclical tilt.
As usual, Hartnett reiterated the view that the second half of 2021 will be defined by the “3 Rs” (rising Rates, Redistribution and Regulation). That, he said, will lead to “low/volatile bond and equity returns” necessitating a penchant for “sell[ing] asset overshoots.”
Stocks are neither a “screaming buy” nor an obvious sell relative to bonds, he wrote.
That squares with my contention from last weekend that the “relative attractiveness” discussion has become virtually impossible to sort out.
Finally, it’s with a heavy sigh that I note Hartnett’s use of the following subheader on a chart showing stalled US initial jobless claims: “Not improving…’hidden unemployment’ or ‘new welfare state?'”
Compared to previous, flawed versions of myself (old models of me were subject to near constant manufacturer recalls to fix various malfunctions), I possess the patience of a saint these days, which allows me to very calmly suggest that if, in fact, enhanced unemployment benefits in the post-pandemic world are preventing claims from normalizing by incentivizing people to collect government aid rather than look for a job, one way to ameliorate the situation is to pay workers enough to change the cost-benefit analysis.
This discussion is almost always one-sided. It’s always about whether government is paying the poor and/or the jobless “too much” to stay home. It’s almost never about whether employers are offering to pay prospective workers too little to incentivize them to take a job.
Try this: Offer to pay the baristas and the warehouse workers and the shelve-stockers the median US household income plus a reasonable benefits package and watch how many people line up down the street to make coffee, lift boxes and stock shelves.
If, on the other hand, we keep posting signs on the door that, stripped of the euphemisms, simply offer to put people to work for a paycheck that leaves them no better off than they would have been otherwise, who are the silly folks in that equation? Is it the people who laugh at the notion that they should acquiesce to making your expensive lattes all day just so they can proudly say they’re “employed and poor” as opposed to “unemployed and poor”? Or are we the silly ones for making such a ridiculous offer in the first place?
Here’s another uncomfortable question: Think about what you do for a living. Does the benefit that you provide to society really outstrip the enjoyment that tens of millions of people get every, single day from their morning latte? For some of you, the answer to that question will be an unequivocal “yes.” Maybe you’re an engineer. Or an orthopedic surgeon. But for some of you, if you’re being honest with yourselves, the answer will be “no.” In which case the next question is this: Why do you deserve to make $80,000 per year while the barista makes $20,000?