Sep 25, 2019

September's market reversal on stocks and Treasury bonds

Data: Investing.com; Chart: Axios Visuals

Stocks have steadily risen over the course of September, with the S&P edging up by around 3% month to date, while safe-haven U.S. Treasury prices have fallen, pushing yields higher, in a sign of investors' increasing appetite for risk.

Why it matters: The pickup in stock buying so far this month has been a major reversal of the trend seen in markets for most of the year. Capital flows had largely been going into bonds and money market funds and out of stocks.

  • Equity ETFs and mutual funds saw net selling in every month of the year except February, for a total of $93.6 billion of outflows through July 31.
  • Bond ETFs and mutual funds had seen inflows every month this year without exception, totaling $258.5 billion.

By the numbers: U.S. equity ETFs have seen 3 straight weeks of net inflows, culminating with $18 billion of funds for the week ending Sept. 18, according to the Investment Company Institute.

  • Bond ETFs conversely saw their lowest inflows since the week ending Aug. 7 during that period, ICI data shows.

The big picture: Without more good news on the trade war, investment flows could reverse out of stocks in the coming weeks and back into bonds. The yield on the benchmark 10-year Treasury note has clearly reversed course after touching 1.90% on Sept. 13, dropping all the way to 1.65% late Tuesday.

Go deeper: Markets are untrustworthy

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Investors sell stocks and hide cash in money market funds

Data: Investment Company Institute; Chart: Andrew Witherspoon/Axios

Investors moved an additional $20.2 billion into money market funds last week, while pulling $13.8 billion out of equity funds, data from the Investment Company Institute shows.

Why it matters: The increased desire for money market funds, which are ostensibly savings accounts, has come as yields on the 10-year Treasury note fell from 2.51% on April 3 to 1.59% on Oct. 2, showing it's fear rather than greed driving fund flows.

Go deeperArrowOct 11, 2019

Foreign investors have already pulled back from China

Data: Institute of International Finance; Table: Axios Visuals

Investment in Chinese assets fell significantly this year as a combination of the trade war and increasingly attractive opportunities elsewhere spread money across a variety of locations in the emerging world.

The big picture: While the economies of many emerging countries are feeling the pressure from China's slowdown and reduced global trade, foreign investment has picked up notably this year from 2018.

Go deeperArrowOct 2, 2019

An inflection point for the market

The market's ebullient mood has soured as September comes to a close and stock traders seem to have lost the risk appetite that had been pushing equities back toward all-time highs.

Why it matters: This week will likely provide an inflection point that will drive the market through the Q3 earnings season, which picks up in mid-October, and could last through the Fed's meeting on Oct. 30.

Go deeperArrowSep 30, 2019