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With Money Flowing Into Stocks At A Record Pace, Goldman Does Not See A "Larger Correction" Taking Place
[ZERO] On Friday we observed that something odd was happening in the market: while stocks were tumbling, pushing most tech names into a deep bear market amid the worst turmoil for risk assets in years, inflows into stocks - both institutional and retail - have been soaring, and according to EPFR data compiled by Bank of America, cumulative equity flows YTD in 2021 have hit a record $153bn, exceeding the pace of early-2021 (when the year started with $151bn in inflows, ahead of a record year of more than $1tn inflows)."How can this be", we asked and answered that the catalyst behind this unprecedented scramble for risk "is that despite falling prices, investors are bailing on other even more impacted securities, and with a record outflows from money markets/cash as well as huge capital flight out of bond funds, this money has to go somewhere, and that "somewhere" is stocks for now, even though if the Fed is indeed set to hike 7 times this year and drain $2+ trillion from its balance sheet, the pain for stocks is only just starting." Over the weekend, Goldman desk trader Scott Rubner picked up on this peculiar flow dynamic, and roughly around the time that Goldman's chief (retail client facing) equity strategist David Kostin was cutting the bank's year-end S&P price target to 4,900 from 5,100 (while warning that much more downside could be in place if a recession hits), Rubner wrote that "with money flowing into global equities "at extreme levels", this would need to change before a larger correction can take place: I would turn bearish if the money slows or reverses" he said, adding that "portfolio rebalances of this size typically last for the full quarter (Q1 2022)." Rubner also reminds that the "headlines will continue to be robust through March (i.e., advisor quarter-end rebalancing) March 4th NFP, March 10th Feb CPI, March 16th FOMC Meeting, etc." Here are the key observations from a still bullish Rubner, as the market continues to crack and remains unable sustain even a modest bounce: Posted by: Besoeker 2022-02-14 |
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