Record High Inflows In Stocks

Outstanding quarterly results for the major American banks and the Federal Reserve's (FED) assurances to keep supporting the US economy by continued printing of Dollars, spurred investors to pour more money into US equity funds last week, more than any other time since the financial crisis in 2009. Global markets seem to have also regained their appetite for stocks; equity markets being for the moment by far the best sector to invest money into. The three major US-indexes; Dow Jones Industrials, the technology heavy NASDAQ and S&P financials have posted one record after the other in July, after being rocked by volatility in May and June.

The big banks: Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), JP Morgan Chase (JPM), Morgan Stanley (MS) and Wells Fargo (WFC), have all beaten analysts forecasts for their quarterly earnings. The S&P 500 hit a record USD 15 trillion after the three biggest banks posted USD 23.12 billion of net income for the three months leading up to July, the highest reported since the second quarter of 2007. It is, however, worth being reminded that only one year later, in 2008, financial markets suffered their worst crisis in decades and brought the liberal market economy to the verge of collapse. Some analysts foresee a similar development when the Fed finally decides to terminate its excessive bond buying program. For now, the market is run by optimism. The S&P 500 financials index is up more than 6 % in July.

There has been a strong increased demand for trading and investment banking services. The record inflows into the stock market contrast with money pulled from bond funds. Last week saw outflows of USD 1.7 billion from investment-grade debt funds and another billion of outflows from US Treasuries as investors turned away from assets regarded as “safe”. The riskier high-yield bonds saw USD 4 billion in inflows: the highest level in two years. Exchange traded funds which track US stocks, have, over the last month, attracted USD 24.4 billion in inflows, four times higher than in the previous six months.