About 1.8 billion shares traded each day in S&P 500 companies last month, the fewest since 2008, according to data compiled by Bloomberg. When the gauge hit an all-time high on May 23, only about 20 of its 500 companies reached 52-week highs, the data show. That’s the lowest number in a year.
When volume and breadth wane even as stocks surge, it’s a warning sign that has preceded losses in the past, according to Sundial Capital Research Inc. in Blaine, Minnesota. Hayes Miller, who helps oversee $57 billion at Baring Asset Management Inc., says the skepticism shows investors distrust a rally built on Federal Reserve stimulus.
“Breadth is suggesting that the market is topping,” Miller, the Boston-based head of multi-asset allocation for Baring, said in a May 28 telephone interview. “This is not a good starting point for buying equities at this price. We all know that investors are induced into risk assets by central bank policies, which keep your safer options very unattractive.”
Exchange-traded and mutual funds that buy U.S. shares saw $1.2 billion in outflows this quarter, while bonds received $34 billion, data compiled by Bloomberg and the Investment Company Institute show. The gap is poised to be the largest since September 2012.
Individuals investing through the funds only started buying stocks in 2013 after the S&P 500 more than doubled from its 2009 low. They added more than $150 billion to funds last year after withdrawing $260 billion in the previous four, data compiled by ICI and Bloomberg show.
“Over the past couple of months we’ve seen an increase of flows out of stocks and back to bonds, which has been a surprise,” Cameron Hinds, the Lincoln, Nebraska-based regional chief investment officer for Wells Fargo Private Bank, which has about $170 billion under management, said in a May 29 phone interview. “We’ve also been surprised by the degree to which the yield on the 10-year Treasury note has drifted lower.”
The benchmark U.S. 10-year note saw its yield drop to 2.44 percent last week, the lowest in 11 months.
“What drives activity in our business is volatility,” Gary Cohn Goldman Sachs President, said in New York on May 28. “If markets never move or don’t move, our clients really don’t need to transact.”
Citigroup Inc. Chief Financial Officer John Gerspach said last week that second-quarter trading revenue could fall as much as 25 percent from year-earlier levels, and JPMorgan Chase & Co. estimated a 20 percent drop.
Bloomberg journalists write their articles, following this criterion, there are reasons for bearish quotes and reasons for bullish quotes so this article ends: “What altered this market is all the money printed by central banks,” Mary Ann Bartels, the New York-based chief investment officer of portfolio strategies at Merrill Lynch Wealth Management, said in a phone interview. The firm oversees about $1.9 trillion. “There is no textbook that tells us how markets are going to trade.”
