Emerging markets are benefiting from flow of funds out of the U.S.
Trading volume in the U.S. market is in decline. Investors are pulling out of the U.S. at a pace the markets haven’t seen since 2004. The principal beneficiaries of this move are emerging markets, especially Latin American stocks.
For 10 straight weeks a total of $30 billion has left U.S. stocks. This marks the longest streak of outflows since 2004.
Instead, investors have turned to emerging markets and European and Japanese stocks. Over this same period these markets saw $36 billion in inflows.
BofAML’s breakdown of last week’s fund flows also pointed to more risk aversion among investors. This could add to some analysts’ worries about deteriorating market internals.
The defensive utilities sector was the only U.S. stock sector to see inflows in the past week.
In addition, investors piled into Treasury bonds. T-bonds saw their greatest inflows in 10 weeks at $900 billion. At the same time, riskier high-yield debt posted $2.2 billion in outflows. These saw their eighth week out of 10 of withdrawals.