Massive move into bond funds just as market gurus expect fixed-income to disappoint

Much more than $36 billion has already flowed into bond funds in January, which means U.S. retail investors are making the largest bet on bond funds due to the fact October 2009, and at a time when numerous high-profile investors are sounding alarmed bells about the finish of the 30 year-plus bull marketplace in bonds.

“The most remarkable flows are into bonds,” mentioned David Santschi, CEO of Trimtabs, which supplied CNBC with all the preliminary fund flow information, which also show strong flows into U.S. equity and international equity portfolios this month. “Bond funds are down within the past four months,” he mentioned. “The most significant mispricings inside the globe currently are in bonds, not stocks.”

Not merely are bonds down, but many anticipate bond losses to develop larger this year. Treasury yields hit their highest level due to the fact 2014 on Thursday. Market gurus, which includes Jeff Gundlach and Ray Dalio, recently have sounded sour notes on bonds, with Gundlach’s firm DoubleLine Capital saying that, amongst stock marketplace hedges, it is commodities that look like a good bet for 2018 and that bond yields, which move inversely to bond prices, will continue to rise.

Bill Gross mentioned final week that, immediately after additional than 30 years, the bond bear marketplace has begun. The world’s biggest funds manager, BlackRock, came into 2018 with no a single overweight recommendation in the fixed-income universe.

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