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Analysts at Bank of America Merrill Lynch (BAML) have warned that the scale of inflows into stock markets has triggered their contrarian 'sell' signal, as stock markets show signs of correcting.
After a strong start to the year, investors have suffered a difficult couple of weeks. But while last week's losses for UK investors were driven mainly by the pound's strength, the sea of red that has covered our latest Accumulator data table shows a broader wobble in markets.
Nearly all the major global stock markets are down over the five days to yesterday, with the bond markets also suffering. The sell-off in government bonds since the start of the year has begun to unsettle the stock markets, with the FTSE 100 set for its worst week in six months.
But there's little sign of that having dented investors' appetite for shares so far. BAML research shows investors have poured a remarkable $102 billion into shares since the turn of the year, and $25.7 billion in the last week alone. The pace of the rotation out of bonds and into shares is meanwhile the fastest on record, they say.
The scale of those inflows has triggered a contrarian 'sell' signal from the group's 'bull and bear indicator', which has accurately signalled a stock market correction 11 times out of 11 since 2002.
Schroders fund manager Ian Kelly was this week the latest to voice his concerns at the level of stock markets, warning the shares hadn't traded at these levels since the dotcom bubble or just before the Wall Street crash.
But while BAML analysts have added to the bearish voices, feedback from their clients show stock market bulls remain to be convinced.
'Too early for a tradeable correction,' said one. 'Macro and investment backdrop too perfect to sell... come back when yields and inflation punitively above 3% and S&P 500 above 3,000.'
You can access the Accumulator table here.