Blow-off top, blow-off equity flows?
That’s one interpretation of the latest fund flows update, which suggests US stock-focused ETFs and mutual funds saw a record influx over the latest weekly reporting period.
The enormous $56 billion haul looks anomalous, frankly.
It was the fourth sizable weekly inflow in five, and single handedly tripled the net YTD flow to US-centric funds, which now stands at more than $80 billion.
If you’re curious, the breakdown showed nearly $31 billion going to US large-caps and more than $8 billion to small-caps. Tech-focused funds saw one of their largest inflows ever on the heels of a record outflow the prior week.
I suppose you could argue this is more evidence to support the notion that equity investors are summarily dismissing sundry risks, both macro- and policy-related. Consensus has now coalesced around a best-case narrative that envisions three Fed rate cuts against a still sturdy economy and a resilient labor market, all as the AI fever dream informs (or misinforms, whichever the case may be) tales of a new productivity boom.
The longer-term flows lookback (above, from BofA) gives you some context for the inflow to US shares this week.
The last time flows were this robust was 2021, year of the “everything bubble.” Strategists and traders now talk openly about the parallel between 2024’s speculative frenzy and various manifestations of mania on display three years ago.
Note that the AAII bull-bear spread was above the long-term average for a 19th week.
That’s the longest stretch since — you guessed it — 2021.
Speaking of 2021 parallels and speculative mania, crypto fund flows notched another new record at $3.4 billion. As BofA’s Michael Hartnett noted, crypto funds are on track for more than $50 billion of inflows this year. Gold funds, meanwhile, saw outflows. On Thursday, JPMorgan said it’d be a mistake to posit a substitution effect.
It’s worth noting that BofA’s pseudo-famous “Bull & Bear Indicator” still isn’t flashing a contrarian warning sign, although it’s close, at 6.5. Hartnett cited “strong credit technicals, equity breadth and inflows.” We’re still “shy of the ominous >8.0 reading that’d indicate ‘excess bullishness,'” he said.
