Our weekly Bespoke Report newsletter is one of the most popular reports included as part of the Bespoke research offering. Each week, we provide a comprehensive rundown of the week’s events and our analysis of where the market is headed next. If you haven’t done so before, sign up for a free trial to see for yourself. You won’t be disappointed! In last week’s Bespoke Report, we looked at various measures of investor sentiment including flows into and out of equity mutual funds. The table below provides a summary of mutual fund flows through the latest reporting period last week showing actual flows on the left and how those flows rank relative to history on the right. With the stock market breaking out of its range to new all-time highs, you would expect flows into equity mutual funds to be surging, and while there has been a surge in mutual fund flows, the direction has been out of as opposed to into stocks.
In the latest week, equity mutual funds saw nearly $17 billion in outflows, bringing the four-week total of outflows to just under $44 bln. On a percentile basis, those total outflows rank below the 2nd percentile relative to all prior one-week periods in the last decade and below the 3rd percentile relative to all other four-week periods. Not only has there been an exodus out of equity mutual funds, but the declines have been broad-based across domestic and global funds.
The fact that outflows have been so large just as the S&P 500 is hitting new all-time highs is unique, to say the least. The chart below shows the rolling four-week total of fund flows going back to the start of 2007. During that time, there have only been eight other periods where the magnitude of outflows from equity mutual funds has been more than $40 billion (as it is now). If you look at the dates of each of those occurrences, more often than not they were during periods of elevated volatility during a market decline rather than in unison with an all-time high in the equity market.