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[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness

Takeaway: All equity categories experienced withdrawals last week while investors sought shelter in IG fixed income and municipal bonds.

Editor's Note: This is a complimentary research note originally published April 21, 2016 by our Financials team. If you would like more info on how you can access our institutional research please email sales@hedgeye.com.

 

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Emerging market equities put up their 5th consecutive week of outflow with a cumulative -$2.3 billion having come out of the category since the week ending March 16th. While EM received some fanfare as a "generational buying opportunity" in mid-February, equity prices and flows haven't broken their down trend and are in again in retreat. Importantly, the recent +20% rally in the MSCI index is not uncharacteristic as there have been eight 20%+ (short covering) rallies in the 4 year price action starting in 2011.

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - EEM Theme normal

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - 4 12 2016 4 38 51 PM 

 

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

Investors pulled funds from all equity categories last week with both funds and ETFs experiencing redemptions totaling -$4.7 billion. Additionally, high yield and global fixed income lost -$419 million and -$820 million respectively while investors sought shelter in investment grade and municipal bonds; IG fixed income took in +$2.1 billion with municipal bonds collecting +$910 million. Finally, money market funds lost another -$8 billion to outflows, as tax season finished up during the week.


[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI19

 

In the most recent 5-day period ending April 13th, total equity mutual funds put up net outflows of -$4.6 billion, trailing the year-to-date weekly average outflow of -$1.4 billion and the 2015 average outflow of -$1.6 billion.

 

Fixed income mutual funds put up net inflows of +$2.8 billion, outpacing the year-to-date weekly average inflow of +$1.6 billion and the 2015 average outflow of -$475 million.

 

Equity ETFs had net redemptions of -$75 million, outpacing the year-to-date weekly average outflow of -$957 million but trailing the 2015 average inflow of +$2.8 billion. Fixed income ETFs had net inflows of +$493 million, trailing the year-to-date weekly average inflow of +$1.9 billion and the 2015 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 2015 and the weekly year-to-date average for 2016:

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI2

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI3

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI4

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI5

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - 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.

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI12

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI13

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI15

 

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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 2015, and the weekly year-to-date average for 2016. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI7

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: While ETF flows were fairly mild last week, the long duration treasury TLT saw the largest percentage flow; investors pulled -2% or -$211 million from the fund.

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - 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.

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI17

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$8.0 billion spread for the week (-$4.7 billion of total equity outflow net of the +$3.3 billion inflow to fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is -$746 million (negative numbers imply more positive money flow to bonds for the week) with a 52-week high of +$20.2 billion (more positive money flow to equities) and a 52-week low of -$19.0 billion (negative numbers imply more positive money flow to bonds for the week.)

  

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - 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:

 

[UNLOCKED] Fund Flow Survey | Eh-Merging Markets...Back To Weakness - ICI11 


CHART OF THE DAY | Consumer Confidence: Elevator Up, Then ... Crash

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... While most Americans don’t own stock market funds and Fed fueled “reflation” indexes anymore (yeah, the 2000 and 2008 cycle peaks did leave some crazy people cautious), a lot of Americans own single stocks like AAPL, NFLX, and GOOGL.

 

That’s why I think it’s going to be a lot harder to stop Consumer Confidence from doing what it always does after the economic, profit, and stock/credit market cycle peaks. See Chart of The Day – it takes the elevator up during the cycle, then it crashes."

 

CHART OF THE DAY | Consumer Confidence: Elevator Up, Then ... Crash - CoD Confidence


Cartoon of the Day: The Elephant In The Room

Cartoon of the Day: The Elephant In The Room - GDP cartoon 04.26.2016

 

We think U.S. GDP will come in significantly worse than even downwardly-revised macro consensus or the Fed is currently forecasting.


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Washington On Wall Street: Handicapping the ‘Acela Primary’

 

Potomac Research Group Chief Political Strategist JT Taylor joins Hedgeye Director of Research Daryl Jones to discuss today’s so-called "Acela primary" bringing voters to the polls in Pennsylvania, Connecticut, Rhode Island, Maryland and Delaware.


Can Fed Stop Recessionary Selloff?

 

In this animated excerpt from The Macro Show, Hedgeye’s Keith McCullough, Darius Dale and Neil Howe respond to a subscriber’s question about whether the Fed can continue propping up the stock market as economic conditions deteriorate and a recession knocks on the door.


Penney: The Better Burger Won't Save Chipotle's Investors

Takeaway: The bad news for Chipotle investors isn't going away anytime soon writes veteran analyst Howard Penney on Fortune.

Editor's Note: Beleaguered Chipotle reports earnings tonight after the market close. Bulls (and bears) will undoubtedly be focused on the pace of Chipotle's losses following last year's E. coli outbreak. But, as veteran Hedgeye Restaurants analyst Howard Penney writes in Fortune, Chipotle has committed a "fatal mistake" and "massive shareholder value will be destroyed over the next few years."

 

Penney: The Better Burger Won't Save Chipotle's Investors - fortune chipotle

 

On Tuesday, the Mexican fast-food chain is expected to report earnings for the first quarter of 2016.

 

Fast-food chain Chipotle Mexican Grill on Tuesday is expected to report its first quarterly loss as a public company following last year’s E. coli outbreaks that exposed the chain’s health safety issues. Wall Street analysts are estimating a GAAP earnings loss of $1.04 versus $3.88 last year. I suspect the media will focus on Chipotle’s loss and its decline in same-store sales of roughly 30% during the first three months this year. Meanwhile, anyone who is still bullish on Chipotle’s stock will likely focus on the pace of its recovery in same-store sales and the improving profitability over the next two years.

 

I’m bearish and think massive shareholder value will be destroyed over the next few years. Up until the E. coli outbreak, Chipotle’s management team has never managed a company crisis. They continue to believe consumer attitudes toward the brand have not changed and that customer traffic will return to pre-crisis levels within the next 12 to 24 months.

 

That outlook is flawed. The fatal mistake the company is making is all about capital deployment. Chipotle ended 2014 with 1,783 stores and $445 million in net income. By the end of 2018, the company’s estimates suggests that they will spend $1.3 billion to add 1,117 new stores, a 62% increase in its store base. The problem is that during the same period between 2014 to 2018, even the most bullish investors of Chipotle estimate that the chain could earn net income of $506 million or incremental net income of $61 million. So if Chipotle invests $1.3 billion in new stores and generate $61 million in incremental new income, that’s a 4.7% return on investment. That is what I call the definition of destruction of shareholder value.

 

CLICK HERE TO CONTINUE READING ON FORTUNE.


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