Equities Euphoria Sends Signal
News
|
Posted 29/01/2018
|
5856
Whilst Aussies enjoyed their BBQ lamb on Friday sharemarkets continued their incredible run in 2018, the S&P500 now up 7.4% in just 1 month to new all time highs.
But Bank of America Merrill Lynch are now very worried. This is looking very much like the euphoria stage in a market and they say they are seeing the biggest sell signal in 5 years. The chart below shows the biggest inflows into global equity funds in a week – ever.
![Record week of active equity fund Record week of active equity fund](/root/NewsArchive/Images/2018/1/BoFAML-20active-20inflows.webp)
In addition to the above $12.2b into active equity funds (not the passive ones we reported on back here), there was a record $32b into all equity funds, and (continuing our ‘smart money hedge thesis’) a near year long high of inflows into gold, at $1.5b.
These flows are coming out of debt and also cash reserves. The market is going ‘all in’. Firstly from corporate debt:
![Credit to equity Credit to equity](/root/NewsArchive/Images/2018/1/BofAML-20credit-20less-20equity.webp)
And a record amount of cash, leaving the ‘big money’ at their lowest cash position ever…(GWIM is BofAML’s high net worth fund).
![GWIM cash allocation GWIM cash allocation](/root/NewsArchive/Images/2018/1/BofAML-20funds-20cash-20allocation.webp)
Since BofAML have been doing their Bull & Bear Indicator in 2002 they have issued 11 sell signals and nailed it 11 times. Mind you they aren’t calling for a huge crash, just a correction and with timing of Feb / March. The elephant in the room however is how this strung out ‘all in’ everything bubble will handle such a correction.
![B&B indicator B&B indicator](/root/NewsArchive/Images/2018/1/bofaml-20B-26B.webp)