Year-End Sell-Off Surge: Massive Profit Booking Shakes Global Markets

Global financial markets experienced notable shifts in the week leading up to December 20. Concerns over potential rate cuts and a year-end market adjustment led to substantial withdrawals from global equity funds, with the MSCI All-World index recording its most significant weekly decline since mid-June. The pullback affected various regions, with U.S. equity funds witnessing the largest outflow since late September, and European and Asian funds also experiencing notable withdrawals.

In the bond market, global bond funds faced a second consecutive week of outflows, totaling $5.38 billion.

While global corporate bond funds saw a net selling of $4.03 billion, government and high-yield funds attracted inflows of $1.66 billion and $882 million, respectively.

On the commodities front, energy funds registered the first weekly outflow in four weeks, approx $99 million, while precious metal funds saw reduced inflows at $22 million, marking their lowest in three weeks.

Emerging markets encountered significant challenges, with the largest weekly net selling of equity funds since March 2020, amounting to $5.66 billion, and outflows of $721 million from emerging market bond funds on a net basis.

The BofA Bull & Bear Indicator, signaling a bullish trend, rose to 5, the highest since December 2021. and the largest 4-week jump since April 2016. Despite this, equity funds faced significant outflows, with $9.4 billion withdrawn in the week, reflecting a shift away from riskier assets. U.S. equity funds saw the largest outflow in ten weeks, while European equity funds had their 29th consecutive week of outflows. Bond funds experienced $4.2 billion in outflows, marking the largest for the year since 2002.

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