What's going on?
It’s nice to know we can all agree on something in these divisive times: investors pulled money out of every market last week, according to a Bank of America report out on Friday
What does this mean?
It’s not exactly a ringing endorsement for the global economy when investors are bailing on everything all at once, but that’s exactly what happened between May 4th and May 11th. Global bonds lost a net $11 billion even after higher US interest rates pushed up yields, while cash and gold funds hemorrhaged $20 billion and $2 billion respectively. Stocks weren’t spared either: investors pulled $6 billion out of the market, most heavily those of European and emerging market (EM) companies. That makes sense: the Russia-Ukraine conflict is leaving Europe’s investors with a nasty taste in their mouths, while EMs are at risk from high food and energy prices, the rising cost of debt, and China’s economic slowdown.
Why should I care?
Zooming in: Tech, tech, tech… kaboom.
Tech stocks were particularly badly hit, suffering their biggest weekly withdrawal of the year at over $1 billion. Not that it’s especially surprising: the tech-heavy Nasdaq 100 index did just post its sixth-straight weekly drop, as the Federal Reserve’s aggressive rate hikes push investors to dump expensive-looking stocks (tweet this). Even Apple – a supposedly stable blue-chip company – is down 20% from its peak, putting it squarely in bear market territory.
For you personally: Buy the dip?
Hey, look on the bright side: the analysts behind the report have pointed out that the fact that investors are pulling money out of every market – safe havens and risky assets alike – could be a sign of “true market capitulation”. In other words, sentiment is now so negative that we might be near the bottom of the market – something you might be tempted to capitalize on…