‘Paralysis Rather Than Panic Best Describes Investor Positioning YTD’

The 4-week average of flows to stocks has turned the most negative since May 2020, according to Bank of America Chief Investment Strategist Michale Hartnett.

In the week to Wednesday, outflows from stocks and bonds were $3.4 billion and $9.1 billion, respectively.

“Flows were ‘risk-off’ heading into FOMC…big inflow to Treasuries ($6.0bn), big outflow from TIPS ($3.2bn), big outflow IG bonds ($7.3bn), largest REIT outflow ever ($2.2bn), big outflow financials ($1.6bn), 4-week average of flows to stocks turning most negative since May ’20,” Hartnett said in a client note.

The strategist added that the world saw 19 bear markets in the past 140 years with an average price decline of 37.3% over the course of over 9 months.

“Past performance no guide to future performance, but if it were, today’s bear market ends Oct 19th ’22 with at 3000, Nasdaq at 10000; good news is many stocks already there, e.g. 49% of Nasdaq >50% below their 52-week highs, 58% of Nasdaq >37.3% down, and 77% of index in bear market, i.e. down >20%; good news is bear markets are quicker than bull markets,” Hartnett added.

Bank of America’s Bull & Bear Indicator remains flat at 2.1 with Hartnett noting that $1.1 trillion of inflow to stocks since January 2021 had an average entry point of 4274 on the S&P 500.

“Yes all are bearish, but paralysis rather than panic best describes investor positioning YTD,” Hartnett concluded.

By Senad Karaahmetovic