An indicator of investor sentiment has fallen to extreme fear levels, after sinking deeper into bearish territory in previous weeks.
Bank of America Merrill Lynch’s bull/bear index shows a reading of just 0.5 on a scale from 0, indicating extreme bearishness, to 10 indicating extreme bullishness.
Last Tuesday saw “massive” redemptions from equity funds, worth $19 billion, the second largest since 2007, the data show.
For the whole week, equities posted the largest outflows on record, of $29.5 billion, prompting the Bank of America Merrill Lynch to talk about “investor capitulation.”
Emerging market equities saw the largest outflows since January 2008 in the week that ended on August 26: $10.5 billion left the asset class.
Four-week outflows were a “huge” $22 billion, or 2.5% of total assets under management, very close to the first contrarian “buy” signal for emerging market stocks since June 2013, according to the analysts.
A contrarian “buy” signal for emerging markets equities would be triggered if the asset class sees further outflows worth between $5 billion and $6 billion.
US stocks saw their biggest outflows in 16 weeks, with $12.3 billion leaving, while European stocks saw their first outflows in 15 weeks and the largest since October 2014, of $3.6 billion.
Japanese equities bucked the trend, with $3.3 billion in inflows. Japanese stocks have seen inflows in 25 of the past 27 weeks.
Looking at sectors, healthcare saw most funds going out, about $2.5 billion, followed by technology with $1.4 billion and the consumer sector with $1.2 billion worth of outflows.
Looking at fixed income, high yield bond funds saw their largest outflows this year, of $4.9 billion, while emerging market debt funds saw their biggest outflows since the June 2013 “taper tantrum”: $4.2 billion.
Investment grade bonds also saw their largest outflows since June 2013, losing $3.8 billion last week, while the safe government/treasury funds bucked the trend, with $1.7 billion of inflows.