This past week, there has been a frenzy of selling of emerging markets assets. The outflows from both stocks and debt in emerging markets reached their highest level since December 2016.
This amounted to $3.7 billion withdrawn from emerging market equities and bonds, according to data analysed by Bank of America Merrill Lynch. These outflows have helped push our old friend, the Bull/Bear indicator developed by BofA Merrill Lynch, to 4.8 — its lowest level since January 2017.
The year-to-date capital flows seem to show a dramatic change in the way investors perceive risk in the stock markets. Emerging market equities, Japan and the financial sector seem to have turned from risky assets into “safe havens”.
The International Monetary Fund is worried. Yes, it’s true that it always is, but this time we should be, too — or at least, those of us living in Britain.
Remember when Donald Trump hinted that he would threaten to restructure the US debt to get better terms on it? His protectionist measures may “help” him to achieve some sort of restructuring, but not in a good way.
The indicator that correctly signalled February’s selloff has fallen below the trigger for the Sell signal, but this does not mean the path is clear for those who are tempted to buy stocks now.
The snow has melted and it’s time to make plans for the future again. And like every spring, those plans are likely to include what has become known as “reflation” — inflation increasing again to a level where it can eat away at the mountain of debt the world’s big economies have to deal with.
Will consumer price inflation, rather than inflation in asset prices like property and securities, finally take off? There have been two interesting points of view last week on this issue.
Everybody is waiting for Jay Powell, the new Fed Chair, to set out his vision this week. The main question is: will there be a “Powell Put” just as there has been a Greenspan put, a Bernanke put and a Yellen put?
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.
What a week last week was for stock markets, and especially for one particular indicator. The Bank of America Bull/Bear indicator, which the week before last came within a whisker of the Sell signal, last week went above it, for the first time in five years.
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.