So what have the retail investors been up to? Buying stocks! But, even with yields down low and no-where to go, they are yet to break the bond buying habit.
Sounds impressive, doesn’t it — more than $100bn in investor money has sploshed over to the US stock market since the start of 2013, according to EPFR and BNP Paribas:
Thanks to reader Grumpy for mentioning this in the Long Room.
Remember this, from 2007? Read more
With all the excitement about ‘the great rotation’, it often feels that the debate focuses too much on analysing the recent flows, and less about the greed/fear dynamics driving them.
It’s been well documented that bond holders are increasingly frustrated by the miserable yields on offer in the fixed income markets, and are apparently flocking into the ‘cheap’ equity markets. We’ve already voiced our scepticism about the scale of this flocking. Yet what’s potentially also underestimated is the degree of skittishness by bond holders when the stock markets show signs of a wobble. After all, a lot of capital in fixed income got there after investors were burnt in the early 2000s. This loss aversion shouldn’t be underestimated. Read more