Global Equity Firms See Investor Exodus, a Sign of a Future Economic Slowdown

By Bryan Jung
Bryan Jung
Bryan Jung
Bryan S. Jung is a native and resident of New York City with a background in politics and the legal industry. He graduated from Binghamton University.
May 14, 2022 Updated: May 14, 2022

Several global equity funds are witnessing a surge in outflows for the week ending May 11, as investors are shaken with news of a potential economic slowdown caused by further tightening by the Federal Reserve to fight inflation.

Many investors have so far stripped $10.53 billion from global equity funds, after liquidating their shares for a fifth straight week of selloffs, compared with the $1.65 billion worth in net sales last week, according to Refinitiv.

Almost every asset class has been facing losses as a looming crisis is encouraging investors to flee big securities including Apple, according to strategists at Bank of America.

The MSCI’s index of world shares plunged to a 1.5-year low of 607.4 so far this week, as more news of skyrocketing inflation raised fears of a hard economic landing this year.

Equities, bonds, cash, and precious metals all witnessed outflows, with technology stocks suffering their biggest losses so far this year at $1.1 billion, second only to financials, which lost $2.6 billion.

Analysts believe that the meltdown in cryptocurrencies and overblown speculation in tech stocks is appearing to rival the dot-com bubble crash of the late 1990s and the global financial crisis of 2007–2009.

The tech-heavy Nasdaq 100 Index saw a sixth straight weekly drop this week, ending its longest run since November 2012, as more Fed interest rate hikes, coinciding with high inflation, spark fears of a recession.

Apple was among the top stocks on Wall Street that lost 10 percent this week, after reaching a new high after the pandemic hit in 2020.

The electronics giant, along with other tech companies like Meta and Netflix, were riding off a two-high as recently as six weeks ago.

Records show that outflows from equities were as high as $6.2 billion, with a total of $11.4 billion loss in bonds, $19.7 billion in cash, and another $1.8 billion in gold.

For the second straight week, investors withdrew $1.73 billion out of money market funds, while this week’s net sales in precious metal funds jumped to a two-month’s peak of $1.54 billion, as gold prices dropped below their 200-day moving averages.

A small inflow to U.S. stocks was outweighed by money exiting Europe and emerging markets, with outflows from funds that bought investment-grade, junk-rated, or emerging market debt hitting $19.3 billion, the biggest exodus of assets since April 2020.

U.S. equity funds saw a net worth loss of $8.46 billion, European funds saw the disposal of $4.33 billion, but meanwhile, investors bought into Asian funds worth $2.23 billion.

High-grade funds led outflows with $11.6 billion in pulled assets, but safe U.S. Treasury bonds recorded their biggest inflow since March 2020.

Financials led a sixth subsequent week of outflows among sector funds, amounting to $1.71 billion, with the mining and industrials sectors losing $0.7 billion each.

Global bond funds saw an outflow of $13.23 billion in a sixth straight week of net selling, with short- and medium-term bonds witnessing losses of $8.14 billion.

Meanwhile, government bond funds took in a third week of inflow, at $3.38 billion.

Data showed that investors sold equity and bond funds of $2.49 billion and $2.65 billion respectively in emerging markets, marking a fifth consecutive week of outflow in both segments.

However, strategists say that a bear market bounce could be coming soon for a rally, but that the bottom has not been reached.

Reuters has contributed to this report.

Bryan Jung
Bryan S. Jung is a native and resident of New York City with a background in politics and the legal industry. He graduated from Binghamton University.