Recent data from the Investment Company Institute shows that mutual fund investors are fleeing equity funds at a staggering pace. As shown in the table below, one-week outflows from equity funds were larger (more negative) than all but 2% of prior periods since 2007. The four week sum of flows is similarly negative. At the same time, fixed income mutual funds are seeing huge and consistent inflows, with total bond flows near the 90th percentile this week.
As shown in the charts below, the one-week collapse in equity fund flows are not without precedent. That said, only periods with extreme equity market volatility saw similarly large declines in cash. January 2008 (as the financial crisis was picking up), October 2008 (in the wake of Lehman and TARP), March 2009 (the ultimate low for the equity market), August 2011 (the US debt downgrade), November 2016 (the last Presidential election) and January of this year (when equities had dropped almost 20% from closing highs). Unlike all of those prior instances, stocks are near all-time highs and volatility is extremely low, presenting an interesting puzzle for assessing the sentiment implications of equity fund outflows. Start a two-week free trial to Bespoke Institutional for access to our weekly fund flows analysis in our Closer report.