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June Showing Big Capital Shifts So Far

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Since the beginning of the year, there have been strong flows into bonds and equities while money markets have remained in the red, according to Bob Jenkins, global head of research at Thomson Reuters Lipper. But he says the first two weeks of June brought about some changes.
While there has been chatter about a “great rotation” out of bonds and into equities, the first two weeks of June have not shown a great blitz into equities.

Rather, Jenkins says, in that time, equity funds have shed nearly $5 billion, driven by redemptions of ETF products, in particular International ETFs, while investors have brought money back into domestic passive products such as Spyders.

Bond funds have been in a long cycle of inflows during a global environment of monetary easing,. Lately, however, emerging market debt and high yield funds have seen sharp sell-offs, according to Jenkins.

Outflows began shortly after comments from Federal Reserve Chairman, Ben Bernanke, from the last week of May which hinted at a slowdown of the $85 billion bond-buying program. Jenkins says the 21-month streak of positive flows to the category may be broken by outflows from bonds in the first two weeks of June.

High-yield funds had outflows of $9 billion, and emerging market debt funds shed more than $1 billion in the first two weeks of June, according to Jenkins.
News from today’s Federal Reserve meeting could reverse or bolster these trends.

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