U.S. stocks apparently picked up, but the rapid outflow of funds institutional leaders shouted: the situation has changed, not for blind bottom-fishing

2022-05-01 0 By

U.S. stocks continued to rise overnight on the third day of the Lunar New Year, quietly coming out of the “four sun”, after strong earnings reports from Google, AMD and other technology companies led to a general recovery in market sentiment.But some organizations stand out and shout, the environment has changed, do not blindly copy bottom!Index funds are seeing their biggest outflows ever Data show that retail investors may be more cautious this time around, even as a flood of liquidity fuels a rush into U.S. stocks whenever they tumble.The SPDR S&P 500 ETF (SPY), the world’s largest exchange traded fund with more than $400bn in assets under management, suffered its worst monthly outflows in its history as US equity markets gyrating wildly in January.Redemptions reached their highest level last month since the fund was set up in 1993, with nearly $7bn of redemptions on the last trading day of January alone, according to data.Meanwhile, invesco QQQ, a nearly $200bn ETF that tracks the Nasdaq 100 index, is suffering heavy outflows.The rapid outflow of money at a time when the U.S. stock market had recovered significantly on Feb. 1 shows that the market’s mood is also changing.On the other hand, data showed U.S. consumer sentiment deteriorated further in late January, falling to its lowest level in more than a decade as worries about inflation and Omicron clouded the economic outlook.On Friday, the University of Michigan’s consumer sentiment index fell to 67.2, the lowest since November 2011, from 70.6 a month earlier. It was worse than expected and below a preliminary reading of 68.8.A measure of current conditions fell to 72, its lowest level since August 2011.The index of future expectations fell to 64.1.Consumers expect inflation to rise to 4.9% over the next year, matching its highest level since 2008, and expect prices to rise at an annual rate of 3.1% over the next five to 10 years, the highest since 2011.Domestic consumption is a big part of the U.S. economy, and it’s hard to be confident about the growth of companies that depend more on their home market.Pessimistic consumer sentiment will hold back spending and thus further economic recovery.Rob Sharps, the new CEO of T.Rowe Price, which manages the $1.7 trillion global money management firm, says the environment has changed and is not conducive to blind bottom-hunting.He pointed out that the Fed’s monetary policy shift, with liquidity tightening and inflation persisting, corporate returns are difficult to sustain high growth, and the accustomed bottom-fishing strategy of the past two years may no longer be useful.The idea not to blindly hunt for the bottom is echoed by former “debt king” Bill Gross, who notes that the “buy the dips” mentality is disappearing.