Halfway To $1 Trillion And A Trio Of Summer Calls

If you were wondering whether inflation worries and the stunning miss on US nonfarm payrolls left investors averse to stocks (as an asset class), the answer would appear to be a resounding “no.”

Nearly $26 billion flowed into global equities over the latest reporting period (figure below). $9.1 billion went to US shares.

That brings the YTD total to $482 billion.

Previously, I suggested that annualizing the flows data or otherwise extrapolating on the way to suggesting what the deluge portends for the full year was probably a dubious exercise. Now, I’m not so sure.

“Inflow[s] to global stocks [are] annualizing a remarkable $1.3 trillion,” BofA’s Michael Hartnett wrote, in the latest edition of the bank’s popular weekly “Flow Show” series.

It’s May, and we’re already halfway to a trillion.

Tech inflows are annualizing more than $90 billion. That would be a record, but not surprisingly, this week marked the first outflow in five, no doubt the result of inflation worries and the read-through for growth shares. The Nasdaq was on track for a fourth weekly decline.

Hartnett went on to flag the “bust” in hyper-growth shares over the past three months, with renewables, innovation, China internet, EVs and biotech all on the frontline.

He proxied those with TAN, ARKK, KWEB, TSLA and XBI, respectively. The losses there are staggering (figure below).

As far as what to expect going forward, Hartnett offered a trio of “summer calls.”

First, he sees tech continuing to struggle pending a Fed pivot or easing from China. Second, he cautioned that a secular inflation view doesn’t preclude a pullback in cyclicals. Finally, Hartnett said the transition from “goldilocks” to “stagflation” entails outperformance from defensive growth names, like staples, big pharma and “monopolistic telcos.”