Investors are piling into bonds but shunning developed market stocks

Photo by Mark Tipple / Barcroft Media / Getty Images

Whether in developed or emerging markets, investors continue to pile into bond funds at present.

This is no better demonstrated than in the chart below from Citibank. It tracks cumulative fund flows into bond, equity and money market funds going back to 2007, using data supplied by EPFR Global.

The solid blue line, indicating flows into developed bond market funds, currently sits at a fresh post-GFC high, the exact opposite to the move seen in developed market equity funds in recent months.

While hard to distinguish on the chart, Citi also note that flows into emerging market bond funds have now increased for the past seven weeks.

“Within bond funds, the main inflows as a percentage of AUM were into Asia ex-Japan and global emerging market (GEM) funds,” notes Citi.

“Within equity funds, the notable flows were inflows into GEM and Latam funds whilst outflows from Western European funds continue.”

The recent trend in flows, seen in the separate chart below from Citi below which tracks weekly movements into bond, equity and money market funds, suggests that investors remain confident that the low-inflation, low-volatility theme seen in financial markets will continue in the period ahead.

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