The Flow Show: Of Bulls & Bears

 

Key takeaways 

 

•        12 months on from WeWork IPO announcement US office leasing activity -68% Y/Y

•        Stocks, consumers, China, inflation all putting upward pressure on bond yields - which is what ends bull markets

•        Meanwhile, China now has more companies in the Fortune 500 than the US

 

 

One year ago: WeWork IPO announced Aug 16th 2019; past 12 months US office leasing activity -68% (current NYC inventory = 453 million sq ft according to JLL), meanwhile IPO ETF up 30% over same period. 

 

One year from now: passive fund assets now 47% of equity AUM, predicted to surpass active in Aug 2021 (Chart 3). 

Scores on the Doors: gold 27%, IG bonds 6.7%, government bonds 6.4%, HY bonds 1.2%, cash 0.5%, global equities 2.5%, US dollar -3.1%, oil -25.4%. 

Weekly flows: $19.9bn out of cash, $13.6bn into bonds, $8.0bn into equities, $0.4bn into gold.

 

Flows to know: 4th largest weekly inflow to munis ever ($1.9bn), 9th largest weekly inflow to TIPS ever ($1.2bn)…investors discounting Dem sweep in Nov. 

BofA Bull & Bear Indicator: rises to 3.5 from 3.4 (Chart 1). 

 

BofA private client flows: GWIM AA 58.9% stocks, 21.4% bonds, 13.1% cash; GWIM AUM at new all-time high of $2.7tn. 

Bond Bear: no new lows in bond yields…Treasury yields up 20bps, bund & JGB yields up 20-45bps from recent lows; stocks, consumers, China, inflation weighing on bonds. 

 

Stock Bull: history of great bear market rallies predicted SPX 3300-3600 between Aug-Jan (Chart 4); but S&P500 >3388 marks new bull market (shortest bear market of all-time - Table 1); equity bull markets more threatening to bonds (see 1999) than bear markets.