JPMorgan reports cautious investor flows amid Iran conflict escalation

Investing.com -- Investors showed continued caution during the second week of the Iran war, rotating out of U.S. equities and into international developed market stocks while buying energy and agricultural commodities, according to JPMorgan’s Delta One Desk.

ETF equity flows registered weak activity at negative 1.1 standard deviations last week, while investors rotated into fixed income at 1.2 standard deviations. Agricultural commodities saw strong inflows at 6.9 standard deviations, and energy recorded 3.2 standard deviations, driven by disruptions in the Strait of Hormuz.

CTAs reduced equity leverage further during the week, and asset managers cut equity future long positions, with S&P 500 futures down 3.5 standard deviations and Russell 2000 futures down 2.1 standard deviations. Equity futures were net bought last week across global equities excluding KOSPI.

CTAs now sit near neutral to modestly long in U.S. equities following continued price weakness. CTAs likely remain short across global fixed income, long across the commodity complex excluding U.S. natural gas, and generally short global foreign exchange versus the dollar.

ETF flows showed $4.3 billion in equity inflows, $15 billion in fixed income inflows, near-average inflows into currency and multi-asset categories, and $1.5 billion in commodity outflows at negative 1.3 standard deviations.

A large BlackRock model rebalance distorted flows in several categories last week, including a rotation out of U.S. equities, emerging markets, and gold into international developed growth and municipal bonds.

Regionally, investors rotated $10.3 billion out of U.S. equities at negative 1.7 standard deviations into developed markets excluding the U.S. at $15.4 billion and 2.8 standard deviations. India saw outflows at negative 3.7 standard deviations and Mexico at negative 1.7 standard deviations, while Korea recorded $0.7 billion in inflows at 1.4 standard deviations, down by about half versus the prior two weeks’ record levels.

In equity sectors, communication services recorded negative 1.5 standard deviations, real estate negative 1.1 standard deviations, and health care negative 1 standard deviation. Industrials saw $1.9 billion in outflows at negative 3.6 standard deviations, driven mainly by the model rebalance.

Equity style flows showed 1 standard deviation inflows into growth and managed risk categories, and $1.4 billion in outflows from multi-factor ETFs at negative 3.7 standard deviations driven by the model rebalance.

Commodity ETFs registered inflows across categories excluding precious metals, which saw outflows due to the model rebalance and additional selling in GLD, SLV, and GLDM.

Asset managers cut equity future long positions, with selling in S&P 500 futures at negative 3.5 standard deviations and Russell 2000 futures at negative 2.1 standard deviations, while buying VIX futures at 3.6 standard deviations. Leveraged funds cut shorts in S&P 500 futures at 1.7 standard deviations and increased shorts in VIX futures at negative 2.6 standard deviations. Managed money bought oil and agricultural commodities.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.