Wall Street warns trading boom is losing steam

Wall Street warns trading boom is losing steam

Equity fund outflows hit their worst level since January as rising Treasury yields and triple-digit oil prices cool investor appetite

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by Editorial Team

The trade that carried Wall Street through an AI-fueled rally is running out of road. Investors pulled $14.2 billion from US equity funds over just three weeks in mid-September, the largest single withdrawal streak since January, according to data from EPFR Global.

Bank of America strategists Jared Woodard and Michael Hartnett flagged the shift in a cautionary note, pointing to a market that is quietly losing the confidence that drove it to record highs just weeks earlier.

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From flood to trickle

The numbers tell the story pretty bluntly. Global equity fund inflows averaged around $52 billion per week in July. By mid-September, that figure had collapsed to roughly $7 billion per week.

The 30-year Treasury yield climbed to its highest level since June 2007, making the risk-free return on government bonds suddenly look a lot more attractive relative to stocks. Oil prices crossing $100 per barrel added another layer of pressure. Energy costs at that level feed directly into inflation expectations, which in turn reinforces the case for yields staying elevated.

The S&P 500 managed to hold a narrow trading range near its record highs during this period. But beneath that stability, the withdrawal of capital from funds suggests the calm may be more fragile than the index level implies.

AI fatigue sets in

Part of what is being unwound here is the AI trade. The rally that lifted technology stocks and drove those record-breaking weekly inflows earlier in the year was built substantially on enthusiasm about artificial intelligence and its productivity potential. Investors are beginning to ask harder questions about when AI investment actually translates into measurable returns. The capital expenditures are real and enormous; the productivity gains remain, for many companies, more projected than proven.

What traders are watching now

The scale of the July-to-September inflow decline, from roughly $52 billion per week to $7 billion, represents the kind of shift that typically precedes a broader reassessment of risk positioning. Woodard and Hartnett’s warning is essentially a note that the market has entered a phase where macro headwinds are real and the tailwinds that made the previous rally so easy are no longer blowing as hard.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
FINANCE
Wall Street warns trading boom is losing steam
Wall Street warns trading boom is losing steam

Equity fund outflows hit their worst level since January as rising Treasury yields and triple-digit oil prices cool investor appetite

by Editorial Team

Share

Add us on Google

The trade that carried Wall Street through an AI-fueled rally is running out of road. Investors pulled $14.2 billion from US equity funds over just three weeks in mid-September, the largest single withdrawal streak since January, according to data from EPFR Global.

Bank of America strategists Jared Woodard and Michael Hartnett flagged the shift in a cautionary note, pointing to a market that is quietly losing the confidence that drove it to record highs just weeks earlier.

Advertisement

From flood to trickle

The numbers tell the story pretty bluntly. Global equity fund inflows averaged around $52 billion per week in July. By mid-September, that figure had collapsed to roughly $7 billion per week.

The 30-year Treasury yield climbed to its highest level since June 2007, making the risk-free return on government bonds suddenly look a lot more attractive relative to stocks. Oil prices crossing $100 per barrel added another layer of pressure. Energy costs at that level feed directly into inflation expectations, which in turn reinforces the case for yields staying elevated.

The S&P 500 managed to hold a narrow trading range near its record highs during this period. But beneath that stability, the withdrawal of capital from funds suggests the calm may be more fragile than the index level implies.

AI fatigue sets in

Part of what is being unwound here is the AI trade. The rally that lifted technology stocks and drove those record-breaking weekly inflows earlier in the year was built substantially on enthusiasm about artificial intelligence and its productivity potential. Investors are beginning to ask harder questions about when AI investment actually translates into measurable returns. The capital expenditures are real and enormous; the productivity gains remain, for many companies, more projected than proven.

What traders are watching now

The scale of the July-to-September inflow decline, from roughly $52 billion per week to $7 billion, represents the kind of shift that typically precedes a broader reassessment of risk positioning. Woodard and Hartnett’s warning is essentially a note that the market has entered a phase where macro headwinds are real and the tailwinds that made the previous rally so easy are no longer blowing as hard.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.