Investors poured a record $ 58 billion into equity funds this week while squeezing liquidity, the latest sign of the fervor sweeping global financial markets.
Technology-focused funds have been the center of the push, with net inflows reaching a record high of $ 5.4 billion in the week to Wednesday, according to EPFR data compiled by Bank of America. The United States had the lion’s share of global equity inflows, at $ 36.3 billion.
Investors also invested $ 13.1 billion in global bond funds while withdrawing $ 10.6 billion from their cash reserves.
The data underscores how historically low interest rates and expectations of a big rebound this year in global economic growth have boosted investor appetite for riskier assets. The shift is causing growing unease among some investors and analysts, who fear asset prices may be too broad.
Investor optimism has been fueled by hopes that coronavirus vaccines will speed up the pandemic response and that US President Joe Biden’s $ 1.9 billion stimulus proposal will help the economy recover from the recession caused by coronaviruses.
US Treasury Secretary Janet Yellen told finance ministers and central bank governors of the Group of Seven Nations on Friday that “now is the time to go bigBecause she called for additional tax assistance to support a sustainable recovery.
“Expectations for the next US stimulus are high,” said Jim Reid, research strategist at Deutsche Bank.
Nonetheless, the prospect of another budget injection – which follows a $ 900 billion relief bill passed late last year and a record $ 2.2 billion stimulus earlier. in 2020 – raised fears of a possible rise in inflation. “I suspect overheating is the biggest concern,” Reid said.
John Normand, head of multi-asset fundamental strategy at JPMorgan, said that while “cyclical and political risks are pervasive, attention to market corrections is expected to be particularly high in 2021”. Equity and debt valuations were “above average on all measures.”
“Valuations are the highest since the tech bubble and some concerns are warranted,” said Dan Suzuki, deputy director of investments at Richard Bernstein Advisors. However, he noted that some of the foam focused on specific themes “anything to do with massive growth potential and disruption”.
BofA noted that about 63% of assets under management at its private bank, which serves richer clients, were now allocated to stocks – a record high.
Wall Street shares broke records again this week, pushing the blue-chip S&P 500 index up by more than 4% for the year so far on Friday morning in New York City. The rally comes as retail investors have taken the US markets by storm thanks to commission-free trading apps offered by brokers such as Robinhood and TD Ameritrade.
Charles Schwab, another U.S. brokerage, said new account registrations in January were up more than 200% year on year to 1,095, highlighting rapid growth in individual investment.
The euphoria also swept through the bond markets with a strong rally in prices pushing global yields down to historically low levels. This has prompted traders looking for higher yields to turn to increasingly risky asset classes. Borrowing costs for rotten rated borrowers in the US market this week fell below 4% for the first time, reflecting rampant demand.
Spain, one of the weakest borrowers in the euro area, has over € 65 billion in order for a sale of 5 billion euros of 50-year debt on Tuesday, as investors rushed to lock in positive returns.