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You have probably heard more than once that the retail trader often makes the worst decisions possible, like wading into the markets at peaks, and then selling out at the lows.  Well, the first part of that has happened, and the latter part may be happening now (but it’s too early to tell).

The markets peaked just a few weeks ago.  Guess when retail investors ploughed huge money into the markets?  OK, this is an easy question – it was at the peak.  It was literally the day that made the high.  The markets saw a record $33.2bn inflow to equity funds, a record $12.2bn inflow into active funds, and $1.5bn into gold.  The average retail investor loved the market rally and just had to get in.  What could go wrong; after all, equites always go up – right?  Sure…and then stocks crashed.

Last weekend JPM said the following: If these equity ETF flows start reversing, not only would the equity market retrench, but the resultant rise in bond-equity correlation would likely induce de-risking by risk parity funds and balanced mutual funds, magnifying the eventual equity market sell-off.

You know what happened next: record equity outflows, a great deal surely coming from ETFs.

Citi recently said the following: “in the week of 2/7/2018, bond funds had an inflow of US$4.0bn and equity funds lost US$30.6bn to outflows. This was the largest outflow on record from equity funds, which just had their record high inflow of US$33.2bn only two weeks ago. The largest outflow had come from US funds which saw US$32.9bn of outflow. “

Some things never change.

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