Global equities attracted $13.7 billion in the latest week to Wednesday, the largest inflows in five weeks, as investors loaded up on risk, fund flow data from Bank of America Merrill Lynch (BAML) showed on Friday. Even US equities reversed their recent trend of outflows, pulling in $7.5 billion, whilst European equity funds attracted $2.2 billion, chalking up a 10th straight week of inflows.
BAML noted that with the S&P 500 touching record highs, the current bull market is the largest ever. The U.S. stock market’s capitalisation as a percentage of GDP has hit an all-time high of over 143 percent, the bank’s analysts said in a note.
“(The) massive central bank liquidity supernova (is) inciting (the) Wall Street bull to flare higher, led by uber ‘growth’,” BAML said, adding the rally would continue until a Wall Street bubble, not a Main Street recovery, forces the Fed to tighten aggressively.
Surprisingly strong U.S. private jobs growth and factory activity data for May have spurred the S&P 500, Nasdaq and global stocks to fresh record highs, raising expectations for strong non-farm payrolls print later on Friday.
This has prompted traders to almost fully price in chances that the Federal Reserve will raise interest rates at its June 13-14 policy meeting. It also raises the possibility of another hike after June. Emerging market assets continued to attract inflows, with equity funds drawing in $800 million and emerging debt funds $1.8 billion.
Emerging equities have returned 17.3 percent in the year to date, topping BAML’s league table of cross-asset winners, whilst emerging market sovereign bonds have returned 7.1 percent.
Overall, global bond funds attracted $6 billion, with corporate bonds pulling in the bulk of the flows. Investment grade debt inflows totalled $3.4 billion, whilst high yield bonds attracted $800 million of inflows.