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ICI Fund Flow Survey | Not the Longest But the Fastest

Takeaway: At 25 weeks, the current streak of domestic equity outflows isn't the longest, but it is the fastest at an avg of -$4 billion per week lost

Investment Company Institute Mutual Fund Data and ETF Money Flow:

Domestic equity funds continue their streak of outflows, now at 25 consecutive weeks with another -$5.2 billion reigned in by investors in the most recent 5 days. The table below shows all domestic equity outflow sequences greater than 4 consecutive weeks in data going back to 2008. We considered a streak of outflows broken by 4 weeks of consecutive inflows. Within these parameters, there have been 8 total outflow sequences with the mean lasting 40 weeks with $105 billion lost on average. The current sequence, as of August 19th, is only the 8th longest in weekly duration, but at -$101.0 billion in total outflows lost, it is the 4th largest in magnitude. With an average outflow of -$4.0 billion per week, the running 2015 outflow is fastest pace on record in our data back to '08. 

 

ICI Fund Flow Survey | Not the Longest But the Fastest - ICI20 4

 

In other products, intermediate trends continued with investors fleeing fixed income given worries over the direction of short-term interest rates. In the most 5 day period, investors pulled -$1.3 billion from total bond mutual funds and ETFs with these withdrawals continuing to fund international equity investments. This week international funds took in +$4.7 billion, their largest inflow since +$5.0 billion in the week ending April 18th, 2007. 

 

ICI Fund Flow Survey | Not the Longest But the Fastest - ICI1


In the most recent 5-day period ending August 19th, total equity mutual funds put up net outflows of -$554 million, trailing the year-to-date weekly average inflow of +$70 million and the 2014 average inflow of +$620 million. The outflow was composed of international stock fund contributions of +$4.7 billion and domestic stock fund withdrawals of -$5.2 billion. International equity funds have had positive flows in 48 of the last 52 weeks while domestic equity funds have had only 9 weeks of positive flows over the same time period.


Fixed income mutual funds put up net outflows of -$2.3 billion, trailing the year-to-date weekly average inflow of +$1.2 billion and the 2014 average inflow of +$926 million. The outflow was composed of tax-free or municipal bond funds contributions of +$50 million and taxable bond funds withdrawals of -$2.3 billion.


Equity ETFs had net redemptions of -$238 million, trailing the year-to-date weekly average inflow of +$2.2 billion and the 2014 average inflow of +$3.2 billion. Fixed income ETFs had net inflows of +$968 million, outpacing the year-to-date weekly average inflow of +$814 million but trailing the 2014 average inflow of +$1.0 billion.


Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.



Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the weekly average for 2014 and the weekly year-to-date average for 2015:


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI2


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI3


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI4


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI5


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI6



Cumulative Annual Flow in Millions by Mutual Fund Product: Chart data is the cumulative fund flow from the ICI mutual fund survey for each year starting with 2008.

 

ICI Fund Flow Survey | Not the Longest But the Fastest - ICI12


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI13


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI14


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI15


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI16



Most Recent 12 Week Flow within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI), the weekly average for 2014, and the weekly year-to-date average for 2015. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI7


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, investors contributed a massive +9% or +$448 million to the long treasury TLT ETF as they sought safety on Chinese and global growth concerns.


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI9



Cumulative Annual Flow in Millions within Equity and Fixed Income Exchange Traded Funds: Chart data is the cumulative fund flow from Bloomberg's ETF database for each year starting with 2013.


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI17


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a positive +$524 million spread for the week (-$792 million of total equity outflow net of the -$1.3 billion outflow from fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is +$2.0 billion (more positive money flow to equities) with a 52-week high of +$27.9 billion (more positive money flow to equities) and a 52-week low of -$18.1 billion (negative numbers imply more positive money flow to bonds for the week.)

  

ICI Fund Flow Survey | Not the Longest But the Fastest - ICI10



Exposures:
The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:


ICI Fund Flow Survey | Not the Longest But the Fastest - ICI11 



Jonathan Casteleyn, CFA, CMT 

 

 


Joshua Steiner, CFA







CHART OF THE DAY: Newsflash! Deflation Is a Headwind

Editor's Note: The following chart and excerpt are from this morning's Early Look written by Hedgeye CEO Keith McCullough. If you're tired of lousy market research and commentary we encourage you to subscribe today.

 

CHART OF THE DAY: Newsflash! Deflation Is a Headwind - z x Chart of the Day

 

...How about this Chart of The Day? This shows you the classic go-to-move for my Old Wall buddies - back-end loading earnings and revenue estimates into Q3/Q4. Given what’s happened to macro markets in the last 3 months, good luck with that.

 


Less Compelling?

“Compelling reason will never convince blinding emotion.”

-Richard Bach

 

Particularly when I look back to those all-time US stock market highs, the botched “reflation” call, etc. in June/July, I can’t count how many times people told me in either meetings or in the media that there was compelling reason for the Fed to raise rates.

 

Now, “due to international developments” and stocks/commodities/yields crashing, the New York Federal Reserve calls a September rate hike, “less compelling.” Cool. So do Fed Fund Futures.

 

And I suspect that the oversold bounce we are getting in everything that crashed has largely to do with the catalyst socialized market participants beg for when they don’t get what you can’t print growth – moarrr central planning #cowbell!

Less Compelling? - Deflation cartoon 02.24.2015

 

Back to the Global Macro Grind

 

It’s a good thing they bounced stocks/commodities from the lows. Imagine they didn’t?

 

Since a lot of people are blaming “China” for all of this, how did markets react to the Chinese cutting rates (again) a few days ago? That did nothing but scare macro markets. So… what markets really needed to see was moarrr – and in the last 24hrs they got it:

 

  1. Rampant rumors that Mario Draghi is going to tell you he can do whatever it takes at Jackson Hole
  2. Rumors that the Fed’s Vice Chair (Fischer) is going to double-down on the dovish Dudley comments (at Jackson Hole)
  3. And since the Chinese can’t dominate the dialogue at Jackson Hole, they just “bought stocks” with State moneys!

 

Yep. Gotta love the Chinese central-planning dudes. They just went all Japanese on the stock market and bought it themselves.

 

Wouldn’t that be fun – if the Fed did the same?

 

Moving along… once markets get through this bounce (after the biggest move in volatility since 2008, it should be big, no?), I still recommend we respect/understand the following risks that caused many of the crashes (defined as price declines of 20% of more in anything that ticks):

 

  1. #LateCycle Slowdown (locally and globally)
  2. #Deflation (obviously)
  3. #LiquidityTraps
  4. #Volatility Asymmetry
  5. #Credit/Profit Cycles Slowing

 

Apologies if I left a few out this morning.

 

Just in case you missed the last one, here’s the update (post 484 of 500 SP500 companies reporting Q2):

 

  1. Revenues -3.8% YoY
  2. Earnings -2.5% YoY

 

Old news, eh. How about this Chart of The Day? This shows you the classic go-to-move for my Old Wall buddies - back-end loading earnings and revenue estimates into Q3/Q4. Given what’s happened to macro markets in the last 3 months, good luck with that.

 

The other big problem (maybe the biggest of all since it’s so obvious in our model) is what I’ve been walking Institutional Investors through for the last 2-days of meetings in Boston and NYC – the GDP Comps for Q3 and Q4.

 

Comps, meaning comparative base effect or year-over-year comparison. Yes, they matter a lot more than some made-up PMI indicator with a random “lag.” And our call remains that on the US consumer side (toughest Christmas comps since 2007), it’s really going to matter.

 

Forget consensus being objective and reviewing the causal factors of phase 1 of this crash – they probably won’t do that. Parker at Mogan Stanley reiterates 2275 SPX! Instead, they’ll pivot, hard, to whatever bull case they can find – and that’s definitely “Lower Gas Prices.”

 

Yep. Everything was awesome at $100-150 Oil, and it’s awesomer at $40. That makes a ton of sense. Even though US Rents are ripping to higher all-time highs and represents 24% of the Median US Consumer’s spending budget vs. Gas at 6%.

 

Oh, but that part of the country doesn’t matter. Right, right. And Consensus Macro hasn’t perpetuated inequality behaving that way either. How do “high-end” consumers “act” on 10-20% stock/commodity market draw-downs. Can’t wait for those compelling Christmas comps.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.99-2.19%

SPX 1
VIX 23.25-43.42
EUR/USD 1.08-1.16
Oil (WTI) 37.66-40.98

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Less Compelling? - z x Chart of the Day


Attention Students...

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Euro, Commodities and Yields

Client Talking Points

EURO

Big part of the bounce was rumoring from the Europeans that ECB President Mario Draghi is going to deliver the devaluation wood @JacksonHole – we don’t doubt that (FX market didn’t either, $1.16 EUR/USD became $1.13, fast) – that is the catalyst when growth is slowing, moarrr #cowbell.

COMMODITIES

Pretty much everything that crashed (China +5.3% this morning, WTI +4.2%, etc.) is “off the lows” as they say – don’t forget to understand/contextualize the bounces (and why we had the crashes). The CRB Index hit a new low yesterday of 185 (-20%, since May).

  

UST 10YR

Wasn’t it just U.S. Yields that bounced on the “risk on” trade yesterday; German and Swiss Yields popped (off their lows) too – stay with the #process and respect the range – UST 10yr Yield’s = 1.98-2.19% right now and a dovish Fischer (like Dudley) gets us paid Long Treasuries.

 

**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 70% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 2%
FIXED INCOME 28% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
MCD

One of the ways that McDonald's is going to take market share back is through one of the most popular items on its menu—the Egg McMuffin. "I honestly believe that if there is a silver bullet, it’s all day breakfast for McDonald’s," says Restaurants Sector Head Howard Penney. "And I do believe they’re going down that road and they will do it."

 

Penney adds that we’ll probably know more about that at the November analyst meeting and what the breakfast potential will be. There’s obviously a lot of things that go around MCD doing breakfast (e.g. shrinking other parts of the menu, etc).

PENN

"We continue to like Penn National Gaming here due to stable regional gaming trends, better than expected quarterly and annual earnings, and the Plainridge and Jamul contribution to PENN’s two-year growth story," writes Hedgeye Gaming, Lodging & Leisure Sector Head Todd Jordan. 

TLT

It was a very good week for those sitting behind the long-bond coming out of the FOMC minutes release on Wednesday. During a tumultuous 5-day stretch in which the S&P 500 fell over -5%, subscribers who followed our recommendation on TLT were sheltered from the market storm and gained almost +2%. Moreover, during the past month, TLT has gained +5.7% versus a -6.8% loss for the S&P 500 (a 1,200 basis point difference). In other words, it has paid handsomely to buck the consensus tide.

Three for the Road

TWEET OF THE DAY

The Grand Central Planning Experiment Gone Bad https://www.youtube.com/watch?v=GUdTw-Hh3aw&feature=youtu.be

@KeithMcCullough

QUOTE OF THE DAY

The phrase I can't is the most powerful force of negation in the human psyche.

Paul R. Scheele

STAT OF THE DAY

A study found that traffic congestion cost Americans $160 billion in wasted time and fuel last year.


The Macro Show Replay | August 27, 2015

 


August 27, 2015

August 27, 2015 - Screen Shot 2015 08 27 at 7.46.45 AM

 

BULLISH TRENDS

August 27, 2015 - Slide2

 

 

BEARISH TRENDS

August 27, 2015 - Slide3

August 27, 2015 - Slide4

August 27, 2015 - Slide6

August 27, 2015 - Slide7

August 27, 2015 - Slide8

August 27, 2015 - Slide9


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

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