Friday's Market Minute: Risk-On Tide Has Turned

Just over 3 weeks ago, the major stock indices were at or near record highs. Then came September, and the historically negative month has proven to investors that there is still uncertainty for equities. The risk-off sentiment for stocks fueled the third-worst weekly outflow on record from U.S. equities, with technology shares leading the way. U.S. stock funds dumped $25.8 billion in the week through Sep. 23, according to EPFR Global data, in a reversal from the previous week’s biggest inflow in more than two years.

Investors purged tech stocks off the 5-month rebound, pulling the most money out of the funds since June 2019. The S&P 500 Index is on course for its fourth straight weekly drop, its longest losing streak in more than a year. Optimism just a month ago has turned into fear for equities as virus concerns, a lack of movement for additional stimulus, and the looming election have turned the tide for investors.

The ‘Risk-Off’ sentiment could easily reverse on any positive news on a vaccine or additional stimulus out of Washington. Headwinds remain but markets tend to get used to concerns and look ahead to greener pastures. Flows into Bond funds and cyclicals have increased, adding to the Risk-Off theme, but will Wall Street continue to pull back positions in Tech? The sector is still up significantly for the year, so maybe the last few days of September will provide more outflows, but this may provide opportunities heading into October.

Photo by Roberto Júnior on Unsplash