$16.9B Worth of Equities Sold in a Week as Bond Inflows Continue: Report
Investors sold $16.9 billion worth of US stocks in the week that ended September 20 and invested $2.5 billion in bonds, new data revealed on Friday. The shift away from equities came after the Federal Reserve and other global central banks hinted at the possibility of more rate hikes this year.
Investors Sell Equities at the Fastest Weekly Rate in 2023
Investors pulled out $16.9 billion from equities in the week that through Wednesday, offloading the stocks at the fastest weekly pace in 2023, Bank of America noted in a research report. Meanwhile, investors purchased $2.5 billion of bonds during the same week, registering its 26th consecutive week of inflows.
Elsewhere, European equities inked their 28th straight week of outflows, with investors pulling out $3.1 billion in the most recent week. Traders also withdrew $300 million from gold and $4.3 billion from cash. However, the latter was insignificant, considering investors poured $1 trillion into cash year-to-date.
In the meantime, energy stocks registered the most significant weekly inflow in around 6 months, at $600 million. The demand for the sector comes amid soaring oil prices, which recently hit a 10-month high, and could even surge to $100 a barrel in the coming months, some believe.
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Central Banks Skip Rate Hike But More Likely to Come in 2023
The U-turn comes in the wake of two key central bank meetings at the Federal Reserve and the Bank of England, which skipped a rate hike in September. However, the Fed and some other central banks hinted more rate increases could come before the end of 2023 as inflationary pressures persist.
“It’s a no-brainer for the Fed to remain sounding hawkish at this meeting. They want to keep the optionality of additional hikes if they need to.”– Michael Pearce, lead U.S. economist for Oxford Economics
Although the annual inflation has declined significantly from the 40-year high recorded last summer, the headline rate stood at 3.7% in August, up from 3.2% and notably higher than the desired 2% target. The uptick in inflation last month was mainly due to rising gas prices.
The US central bank has already lifted interest rates to a record range after imposing 11 hikes in the past 18 months. This marked the most aggressive rate-hiking campaign since the early 1980s, bringing the Fed’s benchmark borrowing costs to 5.25-5.5%.
Do you think the trend of stock outflows will continue if the Fed increases interest rates at the next meeting? Let us know in the comments below.