The Bank of America, in a note released on Friday, said that investors who had become skittish about the rise in coronavirus in the US and the congress failure to pass a fiscal stimulus had triggered the third-largest US stocks outflows in history in the past week alone.
The bank indicated that a total of 25.8 billion dollars of US stocks had been pulled out, with most of the money being pulled out coming from the US stocks with the largest stocks. This comes amidst a market correction that might have put investors on edge in the last few weeks.
The US technology stocks saw the sharpest outflows, with investors pulling out over $1 billion, marking the largest outflow of these stocks since June 2019. The technology stocks, in the past few weeks, have been doing great, reaching their highs on September 2nd. However, investors are still skirmish about the prospect of the market, especially now that the technology market has looked bearish in the last few days.
US stocks outflow
The Bank of America, however, reassured investors that the current fund-flow from the US stock market would be temporary. They indicated that they were not anticipating a reversal to the bearish market and that the current market conditions were just part of a September “topping process,” emphasizing that the monetary policy of the federal government still remained easy and also because irrational exuberance across wall street was not there.
Although their Bull & Bear Indicator has fallen from 3.9 to 3.8 in recent weeks, well above their ‘greed’ readings, the Bank of America termed these adjustments as healthy corrections in the market rather than dangerous.
The bank of America indicated also indicated that the current market activities, such as in tech and SPAC space, which are unwinding, were more likely to trigger heavy trading from October to year-end.
They indicated that this all comes down on whether the markets will see a nasty sell-off came down on what happens in the credit markets. Bank of America said that as long as the spreads do not widen significantly and the corporate traded fund LQD remained within the $130 to $132 price levels, then the markets would not move to a bear market, and as it stands, the LQD ETF was trading 3 percent above the $130 level at press time.
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