Market positioning suggests more pain for equities despite rout

By Saikat Chatterjee

LONDON (Reuters) – A market tendencies indicator by BofA Securities fell to zero for the primary time because the pandemic-induced mayhem in monetary markets in 2020, signalling excessive bearishness as buyers dumped credit score and crypto belongings.

Although U.S. shares confirmed a bear market this week that started in January this 12 months and plenty of different inventory markets in Europe are already down greater than 20% from their highs this 12 months, fairness positioning stays heavy, signalling extra ache forward for buyers.

In a weekly notice on funding flows for varied asset courses, the U.S. funding financial institution mentioned for each $100 of inflows since January 2020, there had been $35 of outflows from debt with zero from shares, indicating extra ache forward for equities.

“Capitulation has been in credit score and crypto, not shares,” BofA Securities analysts led by Michael Hartnett mentioned in a notice. “Because of this we fear fairness lows (are) not but in.”

Varied technical indicators within the inventory market are already suggesting deeper losses could also be forward.

A gauge of U.S. equities encompassing abroad listed shares, bond ETFs and home shares is at a 200-week shifting common, in accordance with the U.S. funding financial institution, an in depth under which might see it drop to four-year lows.

Elsewhere, the excessive flying index is buying and selling close to the 200-week shifting common, ranges it hasn’t traded under because the world monetary disaster in 2008, in accordance with Refinitiv information.

World shares have endured some of the tumultuous weeks in monetary historical past because of aggressive central financial institution tightening to curb inflation. MSCI’s benchmark is down 5.7% for the week thus far, heading in the right direction for the steepest weekly share drop in additional than two years.

World shares have misplaced $20 trillion in market capitalisation this 12 months.

, the world’s largest and best-known cryptocurrency, has misplaced greater than half its worth from this 12 months’s excessive of $48,234 on March 28 and was languishing across the $21,000 stage.

At a broader asset class stage, fairness funds attracted $16.6 billion whereas bond funds noticed the most important outflows since April 2020 at $18.5 billion within the week to Wednesday, in accordance with BofA’s evaluation of EPFR information.

In equities, U.S. fairness funds noticed inflows for previous six weeks, whereas Japan noticed outflows for the previous 4 weeks. Europe noticed outflows for the previous 18 weeks.

GRAPHIC: International shares (https://fingfx.thomsonreuters.com/gfx/mkt/mopanrjywva/globalpercent20stocks.JPG)