Global mutual fund outflows could reach $350 billion in equity markets this year unless fears of recession subside amid an uncertain macro backdrop and tightening monetary policy. Barclays expects the US to remain more vulnerable to higher equity sales than the EU, due in part to higher valuations.
According to Barclays, equity outflow Mutual fund assets under management (AUM) averaged 2.6% this year, compared to 0.3% in previous periods of major stock sell-offs such as the Great Financial Crisis of 2008-09, meaning another $350 billion until Equity sell-offs are on the way this year until recession fears subside, reported by Reuters.
Furthermore, data from Barclays showed that mutual fund investors were net sellers of equities this month – the first time since August 2020. However, equity outflows of mutual funds are still partial as compared to the record high of $1.3 trillion since 2020.
In Barclays’ opinion, economic momentum and EPS revision momentum have both turned negative, indicating that the direction of travel is likely to be toward equity outflows, although the magnitude is unclear at this stage.
Furthermore, if the US Federal Reserve decides to be more aggressive on monetary policy, Barclays does not expect consumer outlook to improve, even if earnings and business fundamentals remain supportive for now.
Markets globally have been volatile as investors largely offloaded their equities due to rising inflation, prompting major economies to raise interest rates. In addition, Russia’s invasion of Ukraine increased the prices of energy, crude oil, yields and other commodities – which also added to inflationary pressures.