Dip-Buyers Hesitant As Crash Wipes 4% Off 97% Gain

Stock funds saw inflows over the last week, but the data didn’t exactly scream enthusiasm.

Global equity funds took in $9.2 billion in the final week of Q3, recouping less than half of the prior week’s outflow, the first of 2021 (figure below).

The four-week average fell to $12.2 billion. The net haul for the year stands at $761 billion.

There was a clear preference for value and reflation expressions, not surprising given how far yields have run since the September Fed meeting.

Financials and energy saw their largest combined inflow since March, for example, while the four-week moving average for small-caps has inflected (for the better).

Funds flowed back into infrastructure stocks following the second-largest outflow on record during the prior week (figure below, from BofA).

The fate of the bipartisan infrastructure plan was still uncertain as of Friday morning in DC, as House Progressives held out for assurances on a broader package of spending.

Overall, flows to US equity funds were a meager $1.2 billion over the week. That certainly doesn’t suggest folks were rushing to buy the dip as stocks stumbled into their worst month since the pandemic drawdown.

Global shares also fell the most since March of 2020 in September (figure below).

Admittedly, I have a hard time forcing myself to write hyperbolic headlines or otherwise wax hysterical about September’s “selloff.”

It’s not just that stocks were “due,” it’s that the gains since the March 2020 nadir are so comically large that a ~4.5% move lower scarcely seems worth mentioning.

Coming into October, the S&P was up around 93% from the darkest days of the COVID drawdown. Only in the (manifestly silly) world of financial journalism does dropping four singles while pulling $100 out of one’s pocket count as an economic “rout.”