Two weeks ago we reported that European stocks had just enjoyed the biggest fund inflows since 2015, just as the continent appeared to have hit its economic peak and according to Deutsche Bank was rolling over...
That assessment, however, did absolutely nothing to halt the "great rotation" out of other global markets and into Europe, especially in the aftermath of Macron's victory, when as Bank of America reported citing EPFR data, Europe saw the largest weekly equity inflows on record.
As BofA's Michael Hartnett puts it in "Allez les Flows" Europe just had a record weekly inflow of $6.1 billion post Macron's win; He also notes that the inflow tide may only be getting started, as current inflows are barely halfway to levels consistent with prior SX5E market peaks...
Another interesting observation: it wasn't just europe, everything is getting boug again, with $8.8bn inflows into equities and $4.4bn into bonds, offset by $0.1bn out of gold
Buy in May, and go Nikkei: Japan now the contrarian "buy".
Largest equity outflow in 30 weeks ($2.7bn); divergent equity flow trends between Europe & Japan imply further appreciation of Euro vs Japanese yen (Chart 2). Au Revoir le Vol: BofAML private clients reducing cash (10.9%, lowest level since Jul'15); and resume buying of low-volatility ETFs past 4 weeks, just as equity volatility drops to lowest since 1993, US Treasury vol to lowest since 2014, CDS vol to lowest on record.
As usual, that "other" great rotation continues for one more week, with $174.9bn inflows to "passive" equity funds vs. $48.1bn outflows from "active" YTD, but this week biggest inflow to"active" in 80 weeks ($0.9bn); perhaps on the heels of Gundlach's recent favorable comments; Meanwhile, there have been $1.6tn inflows to bond funds in past 10 years vs $0.2tn into equity funds…but equity ($126.8bn) keeping pace with bond inflows ($144.1bn) YTD.