Flight to safety is biggest since Lehman Brothers collapse

Investors are shifting from equities to money funds and bonds

Oct 11, 2019 @ 11:19 am

By Bloomberg News

Investors haven't been this bearish since the collapse of Lehman Brothers. At least that's what their positioning is signaling, according to Bank of America Merrill Lynch strategists.

Over the past six months, money-market funds attracted $322 billion of inflows, the largest flight to safe assets since the second half of 2008.

In similar fashion to 2007 and 2008, investors have raised their cash holdings in the face of falling interest rates.

Strategists led by Michael Hartnett wrote in a note Friday that investors are suffering from "bearish paralysis," driven by unresolved issues such as the trade war, Brexit, the Trump impeachment investigation and recession fears.

[Recommended video: Retirement advisers can boost business by focusing on participants in these ways]

Just in the seven-day period ending Wednesday, investors continued to exit equity funds globally, with outflows reaching $9.8 billion, according to the strategists, who cite data from EPFR Global. By contrast, bond funds enjoyed $11.1 billion of inflows.

[More: How gold could replace bonds as a portfolio diversifier]

Despite this wall of worries, the BofAML strategists have an "irrationally bullish" contrarian view, driven by the "bearish positioning, desperate liquidity easing, and 'irrational contagion' from bond bubble to equities." After Greece auctioned negatively yielding bills and the U.S. auctioned 30-year Treasury bonds at a record low yield this week, they see the current positioning in bonds delaying a global recession, which should drive further equity performance.

[More: Advisers say go for the gold as the perfect hedge for trade-war fears]


What do you think?

View comments

Recommended next


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print