U.S. Stocks See Worst Outflow Since 2018 as Fed, China Top Risks

Traders pulled $28.6 billion from U.S. equity funds in the week through Sept. 22, the largest redemption since February 2018, according to a Bank of America Corp. note, which cited EPFR Global data. Instead, they piled about $40 billion into cash, $10 billion into bonds and $84 million into gold.

This week sent tremors through markets, with BofA strategists led by Michael Hartnett citing concerns over the Federal Reserve’s pullback in stimulus, contagion risks from distressed developer Evergrande and pessimism over the passage of bipartisan infrastructure bill in the U.S.

But even after the past week’s massive outflow from equities, BofA private clients remain heavily exposed to stocks, with about 65% of assets under management invested in the asset class. In contrast, allocation to bonds is just 18%, according to the note.

While the BofA and EPFR data track flows through Wednesday, the market action during the rest of the week was more bullish. The S&P 500 bounced after the Fed meeting as investors rejoiced that the central bank left the door open to extend stimulus if the economy needs it. Still, the U.S. benchmark is set for its worst monthly decline in almost a year.

Among other equity regions, global stock funds had their first weekly outflow of this year, Europe saw its biggest redemption since December with $1.8 billion, while Japanese and emerging-market equity funds saw inflows.

Source: Bloomberg Business News