JP Morgan: Fund Flows May Point to Higher Recession Risk

The investment bank compared recent equity outflows to 2008

JP Morgan suggests that retail investors and consumers are losing confidence in the U.S. economy. The bank cited the outflows of capital from the equity markets and the rush into bonds as a reason. In 2019, $683 billion has moved into bond funds. Meanwhile, stock funds have seen outflows of $177 billion. These figures come from the Investment Company Institute, EPFR, and Bloomberg.

JP Morgan Worries About Recession Fears

JP Morgan analysts, led by Nikolaos Panigirtzoglou, issued a warning on Friday.

“Retail investors’ behavior in the fund space this year has the hallmarks of late-cycle investing with growing outflows from equity funds and strong inflows into bond funds,” analysts wrote. “Diminishing consumer confidence would naturally raise further expectations of recession by both economists and markets given the key role the consumer is playing in gauging recession risks.”

During the third quarter, stock funds saw a departure of $74 billion.

“The last time we saw such strong outflows from equity funds was during 2008,” analysts wrote.

However, the report did state that the move from stocks to bonds could be tied to “rebalancing by retail investors” instead of broader economic fears.

Investors have faced a significant amount of fear in the market in 2019. The year started with a tantrum over the Fed’s plans to continue raising interest rates. However, rapid cuts and a trade dispute between China and the U.S. saw many investors head for the exits.

Other geopolitical tensions include the recent attack on Saudi Arabian oil fields, Argentina’s currency collapse, and weak economic growth in China. The negative interest rate environment in Europe and parts of Asia has seen a swell of government debt yielding “less than zero” returns.

[Related: These Hot New ETFs Protect Your Downside…And…Someone’s Taking Out A Patent on Them]

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.

Alt Insights

January 29, 2020

Venture Capital: The Kobe in “Bryant Stibel & Co”

Venture Capital: The Kobe in “Bryant Stibel & Co”

Latest Alternative Investment News

Private Equity: Is Dave and Busters a PIPE Dream?
April 3, 2020     News, Private Equity

Dave and Busters (NASDAQ:PLAY) have been hard hit by the economic downturn. The restaurant and arcade company closed its stores across the United States. It furloughed at least 15,000 hourly…
Real Estate: Blackstone Group Pulls Out of Oakland Deal for Upton Station Building
April 3, 2020     News, Real Estate

Blackstone Group (NYSE: BX) is pulling out of a deal to buy an office property in Oakland, California, for $400 million. Blackstone had planned to use funds from its non-traded…
Liquid Alternatives: ITB, The Home Construction ETF May Have Bottomed
April 3, 2020     Liquid Alternatives, News, Real Estate

ITB is the largest ETF in the home construction space. It provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index….
Digital Assets: Revolut Opens Up Crypto Trading To All Users; Cites 2008 GFC
April 3, 2020     Digital Assets, FinTech

Revolut is now opening up crypto trading to all 10 million of its users. The facility was previously available only to its Premium and Metals classified customers. Standard users may…

Scroll to Top