There have been “massive” outflows from capital markets in the past week, but although they brought Bank of America Merrill Lynch’s “bull and bear” indicator close to the “buy” signal, they haven’t managed to trigger it.
The past week has not been encouraging for investors, with many asset classes haemorrhaging funds at increased speed.
The week before that, on January 30, the Bank of America Merrill Lynch’s Bull/Bear indicator triggered a sell signal for the first time in five years, and markets sold off.
The Bank of America Merrill Lynch Bull/Bear indicator last week hit the highest level since its last sell signal, just as U.S. President Donald Trump took credit, once again, for the surge in the stock market.
Sentiment was getting even closer to triggering a “sell” signal in the stock markets last week, as investors’ enthusiasm climbed even more.
Investors’ optimism remained at very high levels, despite the beginning of tapering of quantitative easing by the European Central Bank (ECB), tensions with North Korea and the Catalan crisis.
The European Central Bank (ECB) will find itself the only game in town soon. It is the only major central bank still buying bonds hand over first, and therefore it is dictating the pace for private investors.
Europe has been through a very rough patch since the financial crisis of 2007-2009, but the real danger for the European Union and the eurozone is still very present. In order to save the EU, Europeans will have to get even closer.
The air came out of the bond bubble last month, when bond funds recorded the highest five-week outflows in three years and a half, according to capital flows data analysed by Bank of America Merrill Lynch economists.
The way the markets have reacted to Brexit, you’d be forgiven to wonder what the fuss was all about.