US stocks see biggest outflows of year as recession fears bite

INVESTORS are rapidly exiting stocks, with US equities seeing their biggest weekly outflows of the year as recession fears take hold.

US equity funds had outflows of US$15.5 billion in the week through Apr 13, while European funds experienced a ninth straight week of outflows, Bank of America Corp strategists wrote, citing EPFR Global data.

The bank's private clients - with US$3.2 trillion of assets under management - also exited stocks in the largest amount since November.

The outflows come as concerns about recession dominate markets, according to strategists led by Michael Hartnett. "Everyone fears it," with food and energy prices surging, he wrote in a note.

Meanwhile, a rise in bond yields means that the so-called 'TINA' argument - that there is no alternative to equities - is "turning," according to the strategists.

Major equity indexes have struggled this year amid a deteriorating outlook for global growth, stubbornly high inflation, and central banks increasingly anxious to tame soaring prices with rate hikes. The war in Ukraine and rising coronavirus cases in China have further weighed on sentiment.

Among sectors, equity investors exited financials while technology, materials and energy stocks saw inflows, according to the data.

Still, BlackRock Investment Institute's strategists are more optimistic.

"Yield spikes have often spelled trouble for stocks, but we believe the past is an imperfect guide in a world shaped by supply shocks," strategists led by Wei Li wrote in a note dated Monday (Apr 18).

Central banks won't slam the brakes on the economy, thus keeping real yields low to underpin equity valuations, they said. BLOOMBERG