Stocks Suffer Biggest Weekly Outflow This Year

In the ever-evolving world of finance, the week ending March 14, 2025, marked a significant shift in investor sentiment. According to Bank of America, investors pulled a staggering $2.8 billion from stock funds, the largest weekly outflow this year. This move signals a clear "risk-off" mood, as investors seek safer havens amidst growing uncertainty.

The S&P 500, a bellwether for U.S. equities, has fallen more than 10% from its recent high, officially entering correction territory. This decline is largely attributed to the stop-start trade wars initiated by U.S. President Donald Trump, which have created a climate of uncertainty for both companies and investors. The volatility is further exacerbated by geopolitical tensions and economic indicators that suggest sticky inflation, pushing back expectations for a Federal Reserve rate cut to September from June.



The outflow from stock funds is not isolated to the U.S. market. European equities saw an inflow of $5 billion, indicating that investors are still looking for opportunities in the global market, albeit with a more cautious approach. Real estate stocks and high yield bond funds also suffered significant outflows, with $1.2 billion and $2.3 billion pulled out, respectively. This shift in investor preference is further evidenced by the $6.4 billion inflow into U.S. government bond funds, the biggest weekly inflow since August.

The "risk-off" mood is also reflected in the performance of U.S. large cap stocks, which saw their largest weekly outflow since December 2022, with $15.8 billion pulled out. This outflow is a clear indication that investors are not only moving away from equities but are also avoiding large cap stocks, which are typically seen as safer investments within the equity market.

The broader outlook, as described by BofA, suggests that the "Anything But Bonds" mood has driven demand for inflation hedges such as gold, which is currently around record highs. The 10-year annualized return of U.S. Treasuries is at 65-year lows, marking the end of a 40-year bond bull market. This shift in investor sentiment towards safer assets is further supported by the significant outflow from stocks and the inflow into bonds.

In conclusion, the recent outflow from stock funds reflects a broader shift in investor sentiment towards a "risk-off" mood. This shift is driven by uncertainty caused by trade wars, geopolitical tensions, and economic indicators that suggest sticky inflation. The potential long-term implications for the market are significant, as the outflow from stocks has yet to unwind much of the $156 billion of inflows into global equity funds so far this year. The continued uncertainty and the preference for bonds could lead to further outflows from equities, potentially impacting their performance negatively in the near future. However, the market is still in a relatively strong position, and investors are still looking for opportunities in the global market, albeit with a more cautious approach.