Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

Daily Report : All equity funds are showing negative flows; Investors flood into precious metals, flee emerging markets

Jason Goepfert
2020-07-10
Again this week, investors yanked money from equity funds. This is the fourth consecutive week, totaling more than $40 billion in outflows.; Investors have been flooding into precious metals funds in 2020, with record inflows. At the same time, they're leaving emerging market equity funds, which are showing the largest year-to-date outflows on record.
View/Print a PDF version of this Report

Headlines


All equity funds are showing negative flows: Again this week, investors yanked money from equity funds. This is the fourth consecutive week, totaling more than $40 billion in outflows.

Investors flood into precious metals, flee emerging markets: Investors have been flooding into precious metals funds in 2020, with record inflows. At the same time, they're leaving emerging market equity funds, which are showing the largest year-to-date outflows on record.

Bottom Line:

  • Weight of the evidence has been suggesting flat/lower stock prices short- to medium-term, though that turned more neutral as stocks pulled back recently; still suggesting higher prices long-term
  • Indicators show high and declining optimism, as Dumb Money Confidence neared 80% in early June with signs of reckless speculation and historic buying pressure, during what appears to be an unhealthy market environment
  • Active Studies show a heavy positive skew over the medium- to long-term; breadth thrusts, recoveries, and trend changes have an almost unblemished record at preceding higher prices over a 6-12 month time frame
  • Signs of extremely skewed preference for tech stocks nearing exhaustion, especially relative to industrials and financials (here and here)
  • Indicators and studies for other markets are mixed with no strong conclusion

Smart / Dumb Money Confidence

Smart Money Confidence: 41% Dumb Money Confidence: 72%

Risk Levels

Stocks Short-Term

Stocks Medium-Term

Bonds

Crude Oil

Gold

Agriculture

Research

All equity funds are showing negative flows

BOTTOM LINE
Again this week, investors yanked money from equity funds. This is the fourth consecutive week, totaling more than $40 billion in outflows.

FORECAST / TIMEFRAME
None

What's it going to take for investors to embrace equity funds again?

They're leaving emerging markets funds, overseas funds, and inexplicably even domestic ones. Lipper reported another outflow of more than a billion dollars from all equity funds this week, the 4th consecutive outflow. The total outflow over the four weeks is over $40 billion, ranking among the largest in nearly 20 years. That's quite remarkable given how resilient parts of the equity market have been.

Generally, big outflows are a decent contrary indicator. Below, we can see every date when there were four straight weeks of outflows, totaling at least $10 billion.

While fund flows don't move perfectly in step with prices, we usually see inflows during rallies and outflows during declines. This year, not so much, and that's a moderately positive sign for stocks over the medium- to long-term.

There are certainly some conflicting data points when it comes to sentiment. We're seeing outflows like this, and insiders are buying. Yet there have also been pockets of historic speculation. Ultimately, these contrasting indicators are washed out in models like Smart and Dumb Money Confidence, where the spread has been hanging around -25%. 

On the Dashboard, we calculate every combination of the two models and show what the S&P's median return over (or under) a random return has been over the next two months given where the models close that day.

With the current levels of the models where they are, the S&P has under-performed a random return by 1.1% over the next couple of months since 1999. So the few positives among the indicators we follow haven't been enough to offset the multitude of negatives.

The most positive aspects of this market have been the thrusts, recoveries, and trend changes that have an almost unblemished record at preceding higher prices over a 6-12 month time frame. It's the short- to medium-term that has been more of an issue since late May.


Investors flood into precious metals, flee emerging markets

BOTTOM LINE
Investors have been flooding into precious metals funds in 2020, with record inflows. At the same time, they're leaving emerging market equity funds, which are showing the largest year-to-date outflows on record.

FORECAST / TIMEFRAME
None

Investors have been loving precious metals. Emerging markets not so much.

Both markets tend to move with the dollar, so it seems odd that investors would favor one so highly over the other. Over the past 30 years, both markets show a consistent negative correlation to the dollar. Generally, the correlations move together - if the dollar is influencing emerging markets, then it's usually influencing gold, too.

Even though both gold and emerging markets have been on a tear, so far this year, precious metals funds have taken in more than $25 billion, a decade-long high.

The flow into emerging markets is at a record low. Halfway through the year, the outflow from these funds has already surpassed the worst year-to-date flow from 2013.

If we combine the flows and look at a ratio of GLD to EEM, then we see the following.

Because flows into precious metals fund swamp those in emerging markets, the spread is much more heavily influenced by the former. Still, we can see the spread has never been higher - investors have never plowed so much money into gold relative to emerging markets.

The big question is whether it matters. The other times there was a large spread between flows into the two markets, the ratio of GLD to EEM fell back in the months ahead. When there was a large flow out of metals and into emerging markets, then the ratio rebounded. While history is short and precedents are few, it's a modest suggestion that investors may have tipped too far toward metals when the dollar is likely to influence both to some degree.


Active Studies

Click here to view the Active Research the site.
Time FrameBullishBearish
Short-Term00
Medium-Term86
Long-Term441

Indicators at Extremes

Click here to view on the site (% Extremes and "Excess" tabs on the dashboard).
% Showing Pessimism: 6%
Bullish for Stocks

NYSE Up Issues Ratio
S&P 500 Down Pressure
VIX
Inverse ETF Volume
NYSE Up Volume Ratio
Mutual Fund Flow (no ETFs)
AAII Bull Ratio
Insider Buy/Sell Seasonally Adj
% Showing Optimism: 40%
Bearish for Stocks

Smart Money / Dumb Money Confidence Spread
Intermediate Term Optimism Index (Optix)
Short-term Optimism Index (Optix)
Dumb Money Confidence
% Showing Excess Optimism
Fidelity Funds Breadth
NYSE High/Low Ratio
Rydex Ratio
Rydex Money Market %
Equity Put/Call Ratio
Equity Put/Call Ratio De-Trended
OEX Put/Call Ratio
NAAIM Exposure Index
AIM (Advisor and Investor Model)
SKEW Index
Options Speculation Index
ROBO Put/Call Ratio
Retail Money Market Ratio
NYSE Available Cash
Mutual Fund Cash Level

Portfolio

PositionWeight %Added / ReducedDate
Stocks29.8Reduced 9.1%2020-06-11
Bonds0.0Reduced 6.7%2020-02-28
Commodities5.2Added 2.4%
2020-02-28
Precious Metals0.0Reduced 3.6%2020-02-28
Special Situations0.0Reduced 31.9%2020-03-17
Cash65.0
Updates (Changes made today are underlined)

In the first months of the year, we saw manic trading activity. From big jumps in specific stocks to historic highs in retail trading activity to record highs in household confidence to almost unbelievable confidence among options traders.

All of that came amid a market where the average stock couldn't keep up with their indexes. There were signs of waning momentum in stocks underlying the major averages, which started triggering technical warning signs in late January. 

After stocks bottomed on the 23rd, they enjoyed a historic buying thrust and retraced a larger amount of the decline than "just a bear market rally" tends to. Those thrusts are the most encouraging sign we've seen in years. Through early June, we were still seeing thrusts that have led to recoveries in longer-term breadth metrics.

The longer-term prospects for stocks (6-12 months) still look decent given the above. On a short- to medium-term basis, it was getting harder to make that case. Dumb Money Confidence spiked and there were multiple signs of a historic level of speculation. This is likely the lowest I will go given what I still consider to be compelling positives over a longer time frame. There is not a slam-dunk case to be made for either direction, so it will seem like a mistake whether stocks keep dropping (why didn't I sell more?) or if they turn and head higher (why did I let short-term concerns prevail?). After nearly three decades of trading, I've learned to let go of the idea of perfection.


RETURN YTD: -4.8%

2019: 12.6%, 2018: 0.6%, 2017: 3.8%, 2016: 17.1%, 2015: 9.2%, 2014: 14.5%, 2013: 2.2%, 2012: 10.8%, 2011: 16.5%, 2010: 15.3%, 2009: 23.9%, 2008: 16.2%, 2007: 7.8%

Phase Table

Click here to view the Phase Table on the site.

Ranks

Click here to view on the site (Ranks tab on the Dashboard).

Sentiment Around The World

Click here to view on the site.

Optimism Index Thumbnails

Sector ETF's - 10-Day Moving Average
Country ETF's - 10-Day Moving Average
Bond ETF's - 10-Day Moving Average
Currency ETF's - 5-Day Moving Average
Commodity ETF's - 5-Day Moving Average

Sorry, you don't have access to this report

Upgrade your subscription plan to get access
Go to Dasboard
DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.