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[UNLOCKED] Fund Flow Survey | Domestic Disturbance

Takeaway: Even with all the focus on the Brexit damage to come, investors are still more pessimistic on domestic equities than international.

Editor's Note: Below is a complimentary research note originally published July 14, 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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Investment Company Institute Mutual Fund Data and ETF Money Flow:

Post-Brexit vote, investors were more optimistic about international equity in the 5-day period ending July 6th, contributing +$1.4 billion to the category. However, domestic equity continues to be a source of funds, losing -$4.5 billion. As defensiveness prevailed, all fixed income categories but global bonds experienced inflows last week, bringing total bond fund flows to +$1.3 billion. In ETFs, both equity and bonds took in a healthy amount of capital. Equity ETFs gained +$4.1 billion with bond ETFs gaining +$6.5 billion. On a year-to-date score, equity ETFS are languishing however averaging just over a -$1.0 billion redemption per week versus passive bond ETFs which are just starting a new growth curve taking in +$1.7 billion.


[UNLOCKED] Fund Flow Survey | Domestic Disturbance - ICI1

 

In the most recent 5-day period ending July 6th, total equity mutual funds put up net outflows of -$3.1 billion, trailing the year-to-date weekly average outflow of -$2.8 billion and the 2015 average outflow of -$1.6 billion.

 

Fixed income mutual funds put up net inflows of +$1.3 billion, trailing the year-to-date weekly average inflow of +$2.2 billion but outpacing the 2015 average outflow of -$475 million.

 

Equity ETFs had net subscriptions of +$4.1 billion, outpacing the year-to-date weekly average outflow of -$1.0 billion and the 2015 average inflow of +$2.8 billion. Fixed income ETFs had net inflows of +$6.5 billion, outpacing the year-to-date weekly average inflow of +$1.8 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 | Domestic Disturbance - ICI2

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - ICI3

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - ICI4 2

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - ICI5

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - 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 | Domestic Disturbance - ICI12

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - ICI13

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - ICI14

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - ICI15

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - 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 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 | Domestic Disturbance - ICI7

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the financials XLF ETF lost -6% or -$952 million in redemptions.

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - 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 | Domestic Disturbance - ICI17

 

[UNLOCKED] Fund Flow Survey | Domestic Disturbance - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$6.8 billion spread for the week (+$992 million of total equity inflow net of the +$7.8 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 -$3.4 billion (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 | Domestic Disturbance - 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 | Domestic Disturbance - ICI11


CALL INVITE | Brexit Implications – A 360° Analysis

Takeaway: Friday, July 22nd at 11:00AM EST

Hedgeye Potomac, in conjunction with the international law firm of Squire Patton Boggs, will be hosting a series of calls on Brexit and will first examine the legal and procedural implications.  

 

With Prime Minister Theresa May now formally installed at 10 Downing Street, we will discuss with Squire’s Brexit Task Force the events following the UK’s exit vote from the EU and what the outcome of the vote spells for the UK and the rest of the world.

 

The call will take place on July 22nd at 11:00AM EST with prepared remarks followed by Q&A.

 

KEY TOPICS ON THE CALL WILL INCLUDE

  • The timing and procedure of the withdrawal, and future negotiations between the UK and the EU
  • The consequences for UK, EU and US companies arising from the end of the application of EU Freedoms, Mutual Recognition, Passports and other privileges
  • Consequences under the domestic laws of the UK and the remaining 27 Member States
  • What happens to International Agreements entered into by the EU
  • What you need to know when entering into new contracts after June 23, 2016 and what you should do with respect to existing contracts
  • Labor, Employment and Immigration
  • What alternatives are available to the UK, including WTO, EFTA, EEA, Swiss-Style, Free Trade Agreements

 

ABOUT SQUIRE PATTON BOGGS

Squire Patton Boggs is a full service global law firm that provides insight at the point where law, business and government meet. Squire Patton Boggs consists of over 1,500 lawyers in 45 offices across 21 countries.

 

Squire Patton Boggs’ Brexit Task Force is a multi-disciplinary team of lawyers and policy advisers who are uniquely placed to support clients from across the globe on the effects Brexit will have on business.

 

The Public Policy teams, particularly in Brussels and Washington, D.C., consist of top tier lawyers with considerable public policy experience - which helps them provide seamless and coordinated discussions with the relevant authorities.

 

 

CALL DETAILS

Toll Free:

Toll:

UK: 0

Confirmation Number: 13641782

 


Quick Take: 2Q GDP ↑ = Fed Hawkish

Takeaway: We think Q2 economic growth will accelerate and the Fed will turn hawkish.

Quick Take: 2Q GDP ↑ = Fed Hawkish - Hawk dove cartoon 06.06.2016

 

Q2 GDP ↑ (vs. Q1) = U.S. Dollar ↑ = Rates ↑ = Reflation (i.e. commodities) ↓ = Fed hawkish

 

That's our latest thinking on the current macro setup. Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:

 

"The #StrongDollar move continues as consensus remains A) bearish on USD (see net positioning in CFTC futures & options data) and B) finally too dovish on what the Fed might do in SEP – what slows this down if we’re right on the Q2 sequential GDP acceleration as European and Japanese economic data continues to slow? Still bearish on Euros."

 

Quick Take: 2Q GDP ↑ = Fed Hawkish - dxy 7 20

 

Note Fed Funds futures' current rate Hike Probabilities:

 

  1. JUL meeting = 8%
  2. SEP meeting = 21%
  3. DEC meeting = 43% 

 

Quick Take: 2Q GDP ↑ = Fed Hawkish - 07.20.16 image

 

On #StrongDollar induced #Deflation...

 

McCullough writes:

 

"Oil continues to break-down as the USD continues to threaten a breakout – WTI down -1.4% yesterday takes it -7.1% in the last month as the inverse USD correlation there remains as real as it is for the CRB Index (down -1.1% yesterday to 186 and signaling bearish TREND @Hedgeye); WTI immediate-term risk range now = $43.91-46.65."

 

 

... Cue the Fed hawks:

 

  • Atlanta Fed President Dennis Lockhart: “I wouldn’t rule out as many as two” rate hikes.
  • “We should be looking toward removing accommodation,” said Robert Kaplan, president of the Federal Reserve Bank of Dallas. "We just should do it in a patient, gradual way.”

 

That's just in the past week.

 

Quick Take: 2Q GDP ↑ = Fed Hawkish - Fed grasping cartoon 01.14.2015

 

What does this mean for investors going forward?

 

In the past few days, Hedgye CEO Keith McCullough has been trimming exposure to our favorite Macro idea, Long Bonds (TLT). We'll be happy to buy them back on selloffs (especially given our bearish outlook for Q3 GDP).

More to come...


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

A Closer Look At How Big Banks Really "Beat" Earnings Estimates

Takeaway: Reality check. Over the past year, Wall Street earnings estimates for big banks typically fell over -20%.

A Closer Look At How Big Banks Really "Beat" Earnings Estimates - Earnings cartoon.spare

in a wall street (and america for that matter) of lowered expectations ... Everybody Beats.

 

That's the long and short of it. The news this morning is Morgan Stanley (MS) beat consensus earnings estimates, sending its shares higher. Setting aside for a second that MS revenue and earnings were down -9% and -12% respectively year-over-year, let's look at the parlor game being played by Old Wall analysts belying those "beats."

 

The first thing to note? In order to manufacture these earnings beats, Wall Street's downward revisions are sometimes massive. Over the past year, big bank consensus earnings estimates dropped anywhere between -9% and -29%. Check out the charts below showing consensus earnings estimates (the red line depicting the steady decline in those estimates.)

Morgan Stanley

  • EPS 2Q16: $0.75
  • Consensus EPS Estimate: $0.59
  • Consensus EPS Revision: -29% in past year

A Closer Look At How Big Banks Really "Beat" Earnings Estimates - ms ee

Citigroup

  • EPS 2Q16: $1.24
  • Consensus EPS Estimate: $1.10
  • Consensus EPS Revision: -25% in past year

A Closer Look At How Big Banks Really "Beat" Earnings Estimates - c ee

Bank of America

  • EPS 2Q16: $0.36
  • Consensus EPS Estimate: $0.33
  • Consensus EPS Revision: -23% in past year

A Closer Look At How Big Banks Really "Beat" Earnings Estimates - bac ee

JPMorgan

  • EPS 2Q16: $1.55
  • Consensus EPS Estimate: $1.43
  • Consensus EPS Revision: -13% in past year

A Closer Look At How Big Banks Really "Beat" Earnings Estimates - jpm ee

Wells Fargo

  • EPS 2Q16: $1.01
  • Consensus EPS Estimate: $1.01
  • Consensus EPS Revision: -9.9% in past year

A Closer Look At How Big Banks Really "Beat" Earnings Estimates - wfc ee

 

None of this suggests big bank impropriety. However, these five stocks are up between +2% and +9% in the past month on significantly downgraded earnings beats.

 

Sad...

 

Stock performance of the banks above over past month

A Closer Look At How Big Banks Really "Beat" Earnings Estimates - bank stock

The game goes on and on. 

 

Don't expect it to stop. Another way to beat on earnings is to reduce the share count via stock buybacks. (Note: Executive bonuses are often tied to EPS growth, so therein lies another motivation to reduce the share count and goose earnings.)

 

  • JPM said it was increasing its planned buyback to $10.6 billion from $6.4B announced last year
  • Citigroup plans a huge $8.6 billion buyback
  • BofA lifted its expected payout in the next year to about $8.1 billion, including a $5B buyback
  • Morgan Stanley's buyback is now $3.5 billion, up from $2.5B previously announced

 


Daily Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, rates and bond spreads, key currency crosses, and commodities. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Wednesday - equity markets 7 20

 

Daily Market Data Dump: Wednesday - sector performance 7 20

 

Daily Market Data Dump: Wednesday - volume 7 20

 

Daily Market Data Dump: Wednesday - rates and spreads 7 20

 

Daily Market Data Dump: Wednesday - currencies 7 20

 

Daily Market Data Dump: Wednesday - commodities 7 20


July 20, 2016

Want more from Daily Trading Ranges? CLICK HERE to submit up to 4 tickers you'd like to see on the list. 

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.65 1.35 1.56
SPX
S&P 500
2,115 2,188 2,163
RUT
Russell 2000
1,157 1,230 1,200
COMPQ
NASDAQ Composite
4,877 5,099 5,036
NIKK
Nikkei 225 Index
14,931 17,039 16,723
DAX
German DAX Composite
9,501 10,316 9,981
VIX
Volatility Index
11.50 17.04 11.97
USD
U.S. Dollar Index
96.11 97.51 97.11
EURUSD
Euro
1.09 1.12 1.10
USDJPY
Japanese Yen
100.01 107.98 106.08
WTIC
Light Crude Oil Spot Price
43.91 46.65 45.45
NATGAS
Natural Gas Spot Price
2.60 2.92 2.73
GOLD
Gold Spot Price
1,315 1,369 1,332
COPPER
Copper Spot Price
2.10 2.28 2.26
AAPL
Apple Inc.
94.61 100.93 99.87
AMZN
Amazon.com Inc.
721 758 739
NFLX
Netflix Inc.
84.55 94.59 85.84
GOOGL
Alphabet Inc.
701 765 753
JPM
J.P. Morgan Chase & Co.
59.75 65.33 63.86
MSFT
Microsoft Corporation
51.22 55.99 53.09



Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, along with our intermediate-term (TREND) view.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.


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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