If you’re looking to flows for clues as to the direction of equities, the picture was mixed over the latest weekly reporting period.
Recall that for much of the first half, US equity-focused ETFs and mutual funds saw sizable net outflows, which contributed to a stark disparity between developed markets and emerging markets.
Nvidia’s “guide heard ’round the world” changed the game, though. Individual investor sentiment inflected in the US, as did equity flows. That helped DM funds claw their way back to ~even for the year, effectively making the near $70 billion inflow to EM funds “total equities.”
Over the latest week, the US flipped back to outflows, though, shedding a net $2.23 billion.
It was the first outflow in three weeks. Since Nvidia’s report, US equity funds have taken in a net $51.7 billion. Prior to the week ended May 31, the same funds saw a net $68.5 billion outflow for 2023.
Between the $2.23 billion US funds lost over the latest week and a 19th straight week of outflows from Europe-focused funds, DMs saw $3.8 billion hit the exits.
The figure below gives you a sense of the breakdown. Despite the clear inflection at the end of May, there’s been no real “all-in” capitulation to US equity funds, which are still sitting with a $17 billion outflow on net for the year.
Incidentally (or not), Deutsche Bank’s Parag Thatte noted that even as discretionary positioning in the US is up dramatically over the past several weeks (pushing the bank’s overall metric into the 82%ile), it remains below prior peaks. “So, who’s been holding back?” Thatte asked, before answering. “In our reading it is equity mutual funds, who have yet to materially raise cyclical exposure,” he said.
Coming quickly back to the latest flows data from EPFR, EM equity funds managed a small-ish $1.664 billion inflow. The YTD gap between DM and EM is now nearly $75 billion — $69.9 billion to EM and $4.6 billion from DM.
China, for all its economic woes and persistent underperformance, has seen nearly $40 billion of inflows this year.
