U.S. Equity Markets Rally to end Volatile Week

Global equities see record inflows in the past week as investors pivot to risk

Investors leaned into the final trading day of the week with some energetic buying across sectors, driving the DJIA and S&P 500 up nearly 1.4% and the Nasdaq higher by 1%. We haven't seen all three sectors rise together since Monday when good vaccine news lit up the market. The rally intensified into the close, which is always a good sign on a Friday afternoon.

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Big investors have been waiting all year to put money to work and they finally did in the past week as a record amount of inflows came into the equity market. Good vaccine news helped ease that flow, even as daily U.S. coronavirus cases topped 150,000 and states and cities enacted curfews and closures.  

2020 has been a strange year for investors. This week was another good example of the push and pull between risk and safety that investors have been struggling with all year. The trend has been strong for global equity markets, but the risks to that performance grow by the day.

Largest week ever of global equity inflows

Let it Flow

The bulls are running wild again as institutional investors poured $44.5 billion into global equities in the week ending Wednesday, according to EPFR. That was an all-time record. U.S. equities took in $32.5 billion of that, with most of it going into ETFs instead of mutual funds. Here' s a snapshot:

  • $44.5 billion into global equities ($32.5 billion in the U.S.)
  • $10.2 billion went into bonds — steady inflows all year
  • $800 million went into gold — heavy inflows all year
  • $17.8 billion came out of cash — finally!

I think it's safe to say that big money was anxious to put money to work. Keep in mind, there is a record $4.1 trillion in money market funds earning less than 0.7%. That's no way to keep your job if you are a professional money manager.

A Motley Crew of Winners

2020 has produced an odd bunch of winners for investors so far. We'll include Bitcoin in this group because it is on one of its historic runs, hitting new highs every week for the past month. 

Big technology stocks in the U.S. and China have been world-beaters all year as companies like Amazon (AMZN), Apple (AAPL), JD.com (JD), and Alibaba (BABA) have delivered healthy returns. But it's rare to see growth stocks have a really strong year while gold and U.S. Treasuries are also delivering relatively strong returns. That's a classic sign of the risk-on/risk-off mentality investors have been operating under throughout the pandemic. They have FOMO (Fear of Missing Out) of the gains tech stocks are making, but they are hedging those bets by buying gold and Treasuries.

Electric car makers stock price chart

Electric Bugaloo

Electric vehicle investors have found their new favorite stock. With the stock ticker SOLO, ElectraMeccanica may have tapped into the force. 

The Vancouver-based designer and manufacturer of three-wheeled electric vehicles saw its shares spike 68.5% this week, cruising past the other EV favorites including Nio, Tesla(TSLA), and Nikola(NKLA). 

The company only made CA$300,000 in revenue last quarter, and lost CA$8.8 million, but managed to impress investors by turning a pro forma profit of $0.19 per share.   

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