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Analysts cry 'sell' as investors rush into shares

Investors have poured $102 billion into shares since the turn of the year, throwing up a contrarian 'sell' signal amid signs of correction.

Analysts cry 'sell' as investors rush into shares

Analysts at Bank of America Merrill Lynch (BAML) have warned that the scale of inflows into stock markets has triggered their contrarian 'sell' signal, as stock markets show signs of correcting.

After a strong start to the year, investors have suffered a difficult couple of weeks. But while last week's losses for UK investors were driven mainly by the pound's strength, the sea of red that has covered our latest Accumulator data table shows a broader wobble in markets.

Nearly all the major global stock markets are down over the five days to yesterday, with the bond markets also suffering. The sell-off in government bonds since the start of the year has begun to unsettle the stock markets, with the FTSE 100 set for its worst week in six months.

But there's little sign of that having dented investors' appetite for shares so far. BAML research shows investors have poured a remarkable $102 billion into shares since the turn of the year, and $25.7 billion in the last week alone. The pace of the rotation out of bonds and into shares is meanwhile the fastest on record, they say.

The scale of those inflows has triggered a contrarian 'sell' signal from the group's 'bull and bear indicator', which has accurately signalled a stock market correction 11 times out of 11 since 2002.

Schroders fund manager Ian Kelly was this week the latest to voice his concerns at the level of stock markets, warning the shares hadn't traded at these levels since the dotcom bubble or just before the Wall Street crash.

But while BAML analysts have added to the bearish voices, feedback from their clients show stock market bulls remain to be convinced.

'Too early for a tradeable correction,' said one. 'Macro and investment backdrop too perfect to sell... come back when yields and inflation punitively above 3% and S&P 500 above 3,000.'

You can access the Accumulator table here.

12 comments so far. Why not have your say?

an elder one

Feb 02, 2018 at 17:00

yes, I am selling some for a cash buffer, though I've seen little sign of that rush for shares reflected in my portfolio - it's slipped a good 2.5% since Xmas.

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Andrew Stevenson

Feb 02, 2018 at 18:13

It would be interesting to know how much influence the AI computer programs that read everything published and sell automatically are going to cause a crash. I well remember the 1987 market fall when computer programs just sold everything and triggered other computers to sell. Very difficult for the humans to stand against that.

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Tyrion Lannister

Feb 03, 2018 at 00:20

Where else can you get a better return than shares right now?

For at least two years many pundits have been talking about an imminent correction. They’ll be right someday and when it happens they’ll triumphantly announce “I told you so”.

If we get a correction in the near future though, that’ll be no more than a self fulfilling prophecy, and in that case a recovery should follow soon after.

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Dennis .

Feb 03, 2018 at 09:56

OK so there is a correction, that is then a buying opportunity and in a few years you will be back with an even bigger portfolio. I strted investing in the mid 80's and lived through the various corrections and benefited every time. You just need the nerve to keep buying at the low points.

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an elder one

Feb 03, 2018 at 10:08

I agree Dennis; its needful to have a cash buffer in such circumstance.

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Feb 03, 2018 at 13:04

Buying stock market investments should be done with a long term view, purchased in the certain knowledge that during that longer term they will rise and fall... and rise and fall...

There's no shortage of explicit reminders and warnings.

Diversify, use collective investments, stick to the plan, apply some discipline and come out the other side much better off. Sit back and let compounding do it's thing, leave the high octane city spivs to burn themselves out chasing after the next big thing.

It's those who've invested far beyond their psychological and financial capacity for (temporary) stock market losses, who fret about their holdings and feed the panic selling, that help to cause the crashes they fear.

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an elder one

Feb 03, 2018 at 13:51

Volatility expresses regression to the mean, which shows there is life in the beast; otherwise it is dead.

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nigel morris

Feb 03, 2018 at 14:16

I agree with Tyrion, Dennis and John and also feel that you should not borrow money to invest in the market and rember that investing is for the LONG TERM

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Peter Sm

Feb 04, 2018 at 12:32

Agree investing is long term and panic selling is no good for bears or bulls. The money changing from bonds to shares is due to the pitiful returns on Gov bonds. Try the utilities with great dividends, plus Petrofac is a great buy price st the minute as is Xafinity a new share to buy buy!!

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Feb 06, 2018 at 12:41

So, I'm delighted to see an analyst correctly predicting imminent market moves (although of course, as Tyrion says, maybe they've been saying the same thing for years). So we have a buying opportunity ahead of us. Question is - when to start? When are we near the bottom?

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Feb 12, 2018 at 11:03

Some great comments here, well done all!

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Tyrion Lannister

Feb 13, 2018 at 06:25

Jezzer, obviously none of us will know when we hit the bottom. As always, the best way to deal with that is to invest gradually.

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by David Kempton on May 24, 2018 at 09:35

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