Fallout from Trump’s victory in the US saw a “great rotation” level of discrepancy between the major asset classes with the largest equity inflows in two years ($28bn) and the biggest outflows in bonds in more than three years ($18bn), the report found.
Led by chief investment officer Michael Harnett, the Bank of America Merrill Lynch team suggested trading had reached a “secular inflection point”.
“If Brexit marked a 5,000 year low in global interest rates, Trump marked the moment investors started to position for bond bear market,” they said.
As anticipated, by Trump’s pro-business policies and expectations of an interest rate rise from the Fed next month, there were record inflows into sector-themed financials ETFs ($7.2bn), alongside heavy trading in materials, Treasury inflation-protected securities (TIPS), and bank loan funds.
Interestingly, precious metals registered their largest outflows since June 2013 at $2.7bn, while there was also a record $6.6bn outflow from emerging market debt funds.
According to Lipper fund flows data, American investors funnelled a record net sum of $27bn to US equity ETFs during the seven days after the election.