JPMorgan sees barriers to the transition from securities to U.S. stocks

(Bloomberg) – Outflows from bond funds to US equity funds are expected to slow in the second quarter, according to strategists at JPMorgan Chase, led by Nicholas Panikirtsoklo.

Investors are increasingly leaving debt securities as central banks withdraw incentive measures to deal with the epidemic. US Treasuries suffered its biggest quarterly loss in more than 40 years. Global bond holdings are now estimated at just 18%, the lowest level since 2008, when JPMorgan reported that it had completed 14 years of disproportionately high allocations and returned to the levels seen before the fall of Lehman Brothers.

“Except in times of crisis, history tells us that a sharp outflow from bond funds will not last more than a quarter,” JP Morgan strategists said in a statement Wednesday.

“Turnover for equity funds from this quarter’s bond funds will decline in the coming quarters, indicating lower fixed income securities sales and lower equity fund purchases from Q2.”

Morgan Stanley has a similar understanding. This week, its strategists said they expect relief from unprecedented losses caused by bonds. Over the past two decades, global government securities have had an average gross return of 1.1% in April, which is better than all other months, says Morgan Stanley.

JPMorgan strategists see a “very high” allocation of shares to non-bank investors’ bonds worldwide, close to the highs seen in the previous cycle of 2006-2007. According to the report, investors around the world currently have a relatively low quota for securities.

While leaps for equities this year outperformed bonds for securities, a decline is expected after last year’s recorded receipts. JPMorgan strategists predict that $ 170 billion will fall from 2021, indicating that about $ 900 billion will come in equity funds by 2022.

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World stocks shaken by the war and occupation of Ukraine by central banks and concerns about inflation are on track to end the worst quarter in two years.

From the year to date, equity funds have attracted about $ 178 billion, while bond funds have pumped out about $ 86 billion, according to Bank of America data from EPFR Global.

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