Bank of America Merrill Lynch’s latest take on the stock market has revealed that a growing number of investors have taken billions of dollars out of stocks and pushed them into bonds.
According to BAML, outflows in global equities have amounted to over $20.5 billion in the space of a week. The events are attributed to what the financial advisor has called “trade deal trauma.”
It also notes that investors are pushing larger and larger amounts of money into bonds, as a sign that an escalation in global trade conflicts is affecting financial markets.
Following threats by U.S. President Donald Trump last Sunday that he would be raising tariffs charged on imports from China, a previously calm market was rocked. Even before the tariffs came into effect on deadline this Friday, the tensions have seen nearly $2 trillion wiped off the global equities market between May 6 and 10 alone.
According to BAML’s strategists, the “risk pullback” witnessed since the highs at the beginning of the month has come after a poor rally that resulted from less-dovish stances from Federal Reserve as well as the People’s Bank of China.
That has only been exacerbated by this week’s trade trauma, with uncertainty hitting various sectors of the global markets.
The bank says that all the cash that has left the stocks market this month, up to the week leading to May 8, ranks third among the biggest outflows in the market in 2019.
Bank of America Merrill Lynch cites EPFR, a firm that specializes in tracking flow, as saying that outflows in the U.S. equities market reached $14 billion. It is the biggest outflow in the sector since January 30.
Even the S&P 500 hasn’t been spared, with the gauge rising 14.5% since the start of the year.
Data shows that investors, who have continued to seek a safe haven against the potential effects of the trade war, have been pushing their money into bonds.
The pump has seen inflows in the bonds market reach $7.3 billion in the week, the eighteenth straight week where there have been such inflows.