WSJ Writes on Fund Flows
The Wall Street Journal writes, "Exodus From Bond Funds Is Mitigating the Stock Market's Swoon," which discusses recent fund flows (but jumps to the wrong conclusion on MMFs). The page 1 (Tuesday) article explains, "The bad news in the bond market has been a rare boon for stocks. Investors pulled nearly $160 billion from money-market funds and $17.5 billion from bond mutual funds and exchange-traded funds in the first seven weeks of the year, according to Refinitiv Lipper. The exodus is already on pace to be the biggest in at least seven years. About $50 billion was funneled into stock funds over that period, including nearly $21 billion so far this month." It continues, "Investors typically use money-market funds as a relatively safe place to park cash. Now that inflation has returned, their purchasing power is sapped. 'There's not a whole lot of options for people,' said Jonathan Waite, a senior investment analyst at Frost Investment Advisors. He ... summed up the situation ...: 'TINA. There is no alternative' to stocks." The Journal adds, "Regardless of how investors divvy up their dollars among stocks, several analysts said the bonds market is in for a rough ride that could put its multidecade bull run on hold. The recent outflows mark a stark reversal from recent years. In each of the past three years, investors added hundreds of billions of dollars to bond funds, with flows peaking at $457.6 billion in 2021. Now, Deutsche Bank analysts compare the environment with 2013, when a large increase in rates around the taper tantrum led to more than $300 billion flowing into stock funds in the following 12 months and bond funds suffered outflows." (Note: Most money fund assets, and all of the outflows YTD, are Institutional, and thus not destined for the stock or bond fund markets. These flows are driven by rate and seasonal cash flow factors and not longer-term market issues.)
