Digesting a Week of Wonder

Vladimir Ilich Lenin once said “There are decades where nothing happens; and there are weeks where decades happen.” This past week felt more like a decade than five days if you were deep within the action as most professional asset managers were.

Below, some of the collected superlatives, via Factset Research:

The extent of the risk-off trade early in the week was further evidenced by the flow data that hit late Thursday/early Friday. BofA Merrill Lynch’s weekly “Flow Show” report noted that equity funds saw $19B of redemptions on Tuesday, the second largest since 2007 (when daily EPFR data became available).

In addition, weekly outflows totaled $25.9B, the largest on record (data goes back to 2002). Beleaguered emerging markets saw $10.5B of outflows this week, the largest since January 2008, while $12.3B left US funds, the most in 16 weeks.

Signs of capitulation and oversold conditions received a lot of attention as the week progressed, setting the stage for the biggest two-day rally in the S&P 500 on Wednesday and Thursday since March 2009. Gavekal Capital pointed out that the S&P 500 had suffered back-to-back declines of 3%+ (last Friday and Monday) for only the ninth time since 1985 (five of those came in the fall of 2008).

In addition, the S&P 500 experienced its biggest intraday reversal to the downside on Tuesday since October 2008. Bespoke Investment Group noted that the index ended more than four standard deviations below its 50-day moving average for a third straight session that day, something that had not happened since 1940.

That was something else. We’ll see if wonders indeed never cease in the coming weeks.