Investors plowed a record $12.3 billion into investment grade bond funds and ditched equities over the past week, Bank of America Merrill Lynch said on Friday, as worries over trade tensions and the world economy reinforced a run for safe-haven bets.
Bond funds overall pulled in $17.5 billion in the week to Wednesday, their second biggest week of inflows on record, the bank said citing EPFR data. Bond funds have attracted $183 billion since the start of 2019.
An "investor capitulation into government bond funds" saw sovereign securities draw in their second largest inflows ever at $8.9 billion, BAML said.
Meanwhile equity funds suffered $10.3 bln of outflows with year-to-date outflows amounting to $155 billion. Across sectors, tech-oriented equity funds lost $1.1 billion, their biggest weekly outflows this year, while funds focused on defensive stocks such as consumer, real estate and utilities all enjoyed inflows.
Chief investment strategist Michael Hartnett said three risks were looming large on the horizon.
"#1 Trump opts to be "Tariff Man" not "Jobs President," causing recession; #2 Powell cuts send Fed into the policy impotence club with ECB & BoJ; #3 Occupy Silicon Valley policies threaten U.S. macro & market leadership," Hartnett wrote, referencing the 2011 "Occupy Wall Street" protest - a backlash against financial inequality and the wealth of the largest U.S. financial institutions in the wake of the financial crisis.
The wider risk-off mood also weighed on emerging market assets which suffered outflows of $2.1 billion on the equity side, in a seventh straight week of losses, and lost $700 million on the debt side, BAML found.
The bank's "Bull & Bear" gauge has fallen to 2.5, indicating cross-asset positioning is bearish, it added.
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