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BofA Sees ‘Zero Capitulation’ as Stock Funds Take In $17 Billion

Stock Markets Jan 28, 2022 07:36AM ET
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© Reuters. BofA Sees ‘Zero Capitulation’ as Stock Funds Take In $17 Billion
 
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(Bloomberg) -- The brutal selloff this week isn’t scaring investors from putting their money in the stock market. 

In the week that pushed the S&P 500 Index to the verge of a correction, stock funds absorbed billions of cash. 

There’s “zero capitulation in equity positioning,”  Bank of America. strategists led by Michael Hartnett wrote in a note on Friday. The strategists, who track EPFR Global data, said equity mutual funds and exchange-traded products took in $17.1 billion in the week to Jan. 26. 

While it may sound counterintuitive that stocks can go down when fund flows are going up, it’s only a small part of what’s happening in the market, compared with flows in derivatives. Investors mainly track the data as a gauge of market sentiment. 

It shows that despite the deep losses in tech stocks, there’s still an appetite for risk among the retail crowd. Stock funds have absorbed $84 billion this year and just two out of the 18 trading days have seen outflows, the Bank of America (NYSE:BAC) strategists said. 

In the report on Friday, Hartnett described the recent market action as “sell hubris, buy humiliation” in reference to the severe losses in industries like clean energy, social media, crypto and innovation. 

The flows data doesn’t entirely show that investors are without fear. Investors increased cash holdings by $14.9 billion, Bank of America wrote. 

Bond funds, which have come under pressure as yields rise, recorded the biggest weekly outflow since March 2021, losing $10.2 billion. High-yield corporate bonds saw the largest outflows since September 2020.

One bright spot: emerging market stocks. The group had their largest inflow in almost a year. 

 

 

BofA Sees ‘Zero Capitulation’ as Stock Funds Take In $17 Billion
 

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Comments (1)
Peter ONeill
Peter ONeill Jan 28, 2022 8:03AM ET
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With 7% Inflation, of course, people will want to put their money where it might obtain ROI above inflation levels - rather than being burnt by staying in cash / stuck in a bank earning 0.01% interest. The US Stock Market is still very frothy due to massive QE (it was a Tech bubble and now Energy and Banks are hitting all-time highs as money pivots). Tech share prices are still about 20% overvalued but no longer at ridiculous levels. Can't see the stock market returning to normal until the Fed starts hovering up a massive money oversupply by selling down their now $8 Trillion Balance Sheet.
Rod Quasney
Rod Quasney Jan 28, 2022 8:03AM ET
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On point.
jason xx
jason xx Jan 28, 2022 8:03AM ET
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retail bulls will throw money at this until spx is 2400
cc cc
cc cc Jan 28, 2022 8:03AM ET
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I do not see why unwinding the balance sheet, should have an impact on stocks, on bonds yes, it will cause an oversupply of treasuries etc. which will lead of course bond prices going down, respectively interest of these going up. or just let it mature....
 
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