Agency warning!The world’s largest ETF suffers the largest redemptions in history.

2022-06-27 0 By

China Fund news reporter Yao Bo Lunar New Year holiday, the United States stocks rebound touch, some of the previous bold “bottom” institutions have tasted the sweet.But some organizations stand out and shout, the environment has changed, do not blindly copy bottom!Another signal is that the recovery comes as the world’s largest ETF is experiencing unprecedented redemptions and bargain-hunting retail investors are starting to exit quickly.Since the outbreak in 2020, there has been a phenomenon in stock markets around the world, in which investors who were brave enough to take advantage of the stock market’s panic-driven plunge have made handsome returns for a short period of time.Even in the latest tech sell-off to start the year, there’s a good example: Netflix, the world’s biggest streaming platform, bought when it hit a two-year low in late January and made a 27% return in four trading days.This time, there were bold bottom-fishing institutions, hedge fund crocodiles on the collapse of 3.1 million shares.Based on the lowest closing price, the move earned Ackman about $300 million.The tech-heavy Nasdaq index is down 8% since the start of the year, more than a third of its gains for all of 2021.The market has recovered more than 7% from its bottom, with the deepest declines reaching nearly 15%.Rob Sharps, the new CEO of T.Rowe Price, the $1.7 trillion global money management firm, points out that the environment has changed and is not conducive to blind bottom-fishing.He pointed out that the Fed’s monetary policy shift, with liquidity tightening and inflation persisting, corporate returns are difficult to sustain high growth, and the accustomed bottom-fishing strategy of the past two years may no longer be useful.Since the pandemic, the flood of liquidity has spurred retail investors to rush in when markets fall, but they may also be more cautious this time around: index funds are suffering their biggest outflows ever.Redemptions from $400bn of S&P 500 exchange-traded funds were the highest since the fund was launched in 1993, data showed.On New Year’s Day alone, Feb. 1, the net outflow reached $7 billion, the largest one-day outflow in nearly four years.Meanwhile, invesco QQQ, a nearly $200bn ETF that tracks the Nasdaq 100 index, is suffering heavy outflows.The rapid outflow of money at a time when the U.S. stock market had recovered significantly on Feb. 1 shows that the market’s mood is also changing.The idea not to blindly hunt for the bottom is echoed by former “debt king” Bill Gross, who notes that the “buy the dips” mentality is disappearing.Since the outbreak, governments around the world have been gradually retrenching, especially the latest hawkish remarks by the Federal Reserve, which has led the market to expect at least three interest rate hikes this year.With liquidity expectations reduced, many bulls are pinning stock price gains on improved corporate earnings: the global economy continues to open up and return to a normal pace, and s&p 500 earnings are expected to grow by 25% in the latest quarter, up from the 22% expected at the beginning of January.But data from the latest earnings season suggest it will be hard to sustain much of the post-pandemic pace: Just 4.3% of S&P 500 companies beat expectations as of Feb. 1, well below the 16% average over the past year and in line with the average since 1994, according to Reuter.From a corporate point of view, Goldman Sachs, Netflix, paypal, starbucks and other billion-dollar giants have all reported disappointing results. Despite the recent rebound, their shares have declined to varying degrees this year:On a year-to-Feb. 2 valuation basis, the S&P 500 is trading at 20 times forward earnings, down from 22 at the start of the year but still above its long-term average of 15.5.Investors also kept an eye on another data surprise, with U.S. consumer confidence unexpectedly falling to its lowest level in more than a decade in January, reflecting the rapid spread of Omicron and the impact of high inflation on U.S. consumption.With so much of the U.S. economy dependent on domestic consumption, it’s hard to be confident about the growth of companies that are more dependent on the U.S. market.Pessimistic consumer sentiment will hold back spending and thus further economic recovery.Disclaimer: This article is reproduced for the purpose of conveying more information.If the source is wrong or violated your legitimate rights and interests, please contact the author with proof of ownership, we will promptly correct, delete, thank you.Email address: newmedia@xxcb.cn