The “Risk-On” trade hit a wall this week.
For the first time in three weeks, global equity funds recorded a net outflow (-$6.07 billion), driven by a sharp pullback in US allocation amid valuation concerns and rate uncertainty.
💸 THE GREAT ROTATION (Week ending Jan 7):
1️⃣ The “Flight to Cash” is Back: The most stunning number in the dataset: Money Market Funds saw a massive $161.27 billion net inflow—the largest weekly jump since December 2024. Investors are clearly parking capital on the sidelines as the Fed signals that borrowing costs won’t fall further in the near term.
2️⃣ Regional Divergence (US vs. The World): While Wall Street sold off, the rest of the world saw strong buying activity:
- 🇺🇸 US: “Massive sales” drove the global net negative.
- 🇪🇺 Europe: +$11.98 billion inflow (Biggest week since May 2025).
- 🌏 Asia: +$4.52 billion inflow.
- 📈 Emerging Markets: +$3.16 billion inflow (Most in 6 weeks).
3️⃣ Asset Class Shifts:
- Bonds: Attracted $17 billion (recovering from outflows), with investors favoring short-term and corporate debt for yield.
- Tech: Valuation jitters weighed on leaders like Nvidia (-2.0%) and Broadcom (-4.4%).
- Gold: Recorded a rare outflow ($268M), snapping an 8-week winning streak.
💡 ANALYST TAKEAWAY: This data suggests a “Valuation Cap” has been reached in US Tech. The capital isn’t leaving the market entirely; it’s rotating. We are seeing a classic diversification play: selling expensive US beta to buy cheaper European/Asian delta and high-yielding, risk-free cash.
👇 Allocators: With Money Market funds absorbing $161B in a single week, is “Cash” the biggest competitor to Equities in Q1?