Citigroup Comments On Collapsing U.S. Equity Flows, Notes Buybacks Are Supporting Stocks

Investors are going long fear and short hope. According to a new report by Citi Research analyst Robert Buckland, money has been pouring out of stocks and into bonds in 2016.

Heading into the last few weeks of the year, bond funds have seen their largest annual inflows since 2012. Incredibly, this inflow has come at a time when bond yields are historically low around the world.

At the same time, equity funds have witnessed their first net outflows since 2012. If the current pace of equity fund outflow continues, it would be a new record by the end of the year. The previous record for annual outflows was set during the peak of the Financial Crisis back in 2008.

“Investors, it seems, are prioritizing capital protection in their allocation,” Buckland explained.

Related Link: Why A 1% Rise In Interest Rates Could Produce 'One Of The Worst Drawdowns In The Past 50 Years'

Despite potentially record-setting outflows in equity funds, the SPDR S&P 500 ETF Trust SPY is up 4.5 percent in 2016.

Buckland is not particularly surprised by this phenomenon and attributes much of the move to massive corporate buybacks.

“Global equity fund flows are part of our bear market checklist as a contrarian indicator,” he noted.

In addition to money flows from stocks to bonds, Buckland also mentions that money has been flowing out of European equities and into emerging market equities.

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