LONDON, June 16 (Reuters) - The second biggest ever inflow into U.S. stocks has given global share funds their best week since last year’s U.S. election, data from Bank of America Merrill Lynch showed, though there was a warning a “Humpty-Dumpty”-style big fall could be coming.
Figures from the U.S. bank which tracks investment flows from Wednesday to Wednesday showed $17 billion had gone into Wall Street equity funds over the last week, second only to a $35.5 billion one back in December 2014.
It fuelled a $24.6 billion global increase into stocks as a $26.3 billion surge into exchange traded funds saw no impact from the week’s sell-off in tech stocks and was only trimmed fractionally by a $1.7 billion outflow from mutual funds.
Investors also continued to pile into “high-yielding” fixed income such as emerging market bonds and high-yield debt too, taking inflows over the past four weeks to $35 billion, the fastest pace since Feb. 15.
In the tug of war between deflation and inflation, government bonds, seen as a deflation asset, saw the largest inflows in 20 weeks at $1 billion whereas inflation-linked U.S. ‘TIPS’ saw minor outflows for a forth week in five.
There was also a warning about the recent rise in stocks.
BAML analysts said an “end of an era” was looming with the world’s big central banks, that have flooded $10.8 trillion into financial markets since the collapse of Lehman Brothers and spent $1.5 trillion this year alone, set to become sellers of assets in the coming years.
It “won’t spark (an) immediate bear market... But this inflection point in monetary policy will become negative in coming quarters; Icarus trade likely followed by Humpty-Dumpty (a ”big top“ or big flash crash) later in year,” BAML said.
“Finally volatility is a buy.” (Reporting by Marc Jones; Editing by Toby Davis)