The Great Rotation has hit a bit of a snag, with the largest weekly outflow from equities since August 2011. Emerging market and US equities took the biggest hits regionally, while consumer goods had the largest equity outflows by sector by a fair margin.

“Equity funds globally have suffered from $28bn (or 0.5% AUM) of outflows in the week ending February 5th, according to EPFR. It’s been the worst week of redemptions for equity funds in over two years,” says a report from Citi’s global strategy team.

US equity fund flows negative for the year

US equity outflows for the last two weeks now stand at $34 billion (1.1% AUM), bringing the year-to-date flow negative $27 billion in outflows. Emerging markets had a fifteenth consecutive week of net redemptions ($2 billion or 0.9% of AUM), while bond funds had $15 billion (0.5% AUM) of inflows, with US bond funds gaining the most.

“Despite the recent sell-off, European and Japanese equity funds have had positive flows every week of this year,” says the Citi report. European equity funds are up $15 billion (1.8%AUM) for the year while Japanese equity funds are up $8 billion (3.9% AUM).

fund flows 021014 Equity Outflows

fund flows by asset class 021014 Equity Outflows

cumulative asset 021014 equity outflows

Equity outflows led by consumer goods

“Persisting nervousness around EMs and a disappointing ISM seem to have triggered 2-year high redemptions from total equity funds over the past week,” write Deutsche Bank strategists Jan Rabe and Adrian Rott. “Seeing that the pull-out from US equities was almost entirely driven by outflows from US ETFs (“less sticky money”), our Index strategists believe that what we are seeing is short term repositioning rather than a reallocation away from the US.”

Liquidity is a big selling point for ETFs, so it makes sense that people may just want to step back from US equities until the market stabilizes. Breaking down the outflows by sector reinforces this view, because investors are mostly pulling out of consumer goods after an extremely disappointing earnings season. Major retailers like Best Buy Co., Inc. (NYSE:BBY) and J.C. Penney Company, Inc. (NYSE:JCP) that had looked like they could be on the mend going into the holiday season had declining same store sales, causing analysts to reduce their price targets and investors to lose faith in their strategy.

sector flows 021014 equity outflows