Geopolitics is actively re-pricing global capital flows.
According to LSEG data, net inflows into global equity funds shrank to $9.19 billion in the week ending Jan 21—a massive deceleration from the $45.57 billion seen the previous week. The primary driver? A sharp reversal in US sentiment triggered by tariff threats over the Greenland dispute.
🔄 THE GREAT ROTATION: While the headline number slowed, the direction of money tells the real story:
- 🇺🇸 US Outflows: Funds shed $5.26 billion (reversing the previous week’s massive $28B inflow).
- 🇪🇺 Europe Inflows: +$10.22 billion.
- 🌏 Asia Inflows: +$3.89 billion.
- 📈 Emerging Markets: Saw a massive $7.6 billion inflow—the largest since October 2024.
🛡️ DEFENSIVE POSITIONING: Investors aren’t just changing geography; they are changing asset classes.
- Bonds: Gained $12.52 billion (3rd straight week of buying).
- Gold: Precious metals funds drew $1.96 billion (10th inflow in 11 weeks).
- Money Markets: Saw huge outflows of $35 billion, suggesting cash is being deployed, just not into US equities.
🗣️ THE STRATEGY: Mark Haefele, CIO at UBS Global Wealth Management, sums up the mood: “Diversification across regions and asset classes is all the more important in a polarised world, where risks are higher and outcomes less predictable.”
💡 ANALYST TAKEAWAY: The data confirms a “Risk-On / US-Off” dynamic. Investors are still buying earnings growth (expected +16.44% for Q4), but they are doing it in Europe, Asia, and Emerging Markets where valuations are lower and political risk is—ironically—perceived as more stable than current US trade policy. The massive $7.6B into EM suggests the “Search for Yield” is back on.
👇 Asset Allocators: Is the rotation into Europe and EM a tactical trade on valuations, or a structural hedge against US policy volatility?