The CEO of BlackRock, Larry Fink, said that The U.S. stock market should not be trading at record highs because the data on fund flows don't support the bearish trend at the moment.
I don't think we have enough evidence to justify these levels in the equity market at this moment," Fink added.
He said the recent rally has been supported by institutional investors covering shorts, or bets that stocks would fall, and not individual investors feeling bullish.
Since Brexit, we've seen ETF flows almost at record levels, around $18 billion of inflows," Fink said. "However, in the mutual fund area, we're continuing to see outflows."
What that tells you is retail investors are pulling out, he said. Right now we are witnessing institutions who were short going into Brexit and all now rushing in to re-calibrate their portfolios."
Besides the stock mutual fund outflows, Fink said he's been seeing huge inflows in fixed-income products. "So you're seeing a risk-off trade, as we call it, around the world."
Moreover, Fink added that there is a tendency for liquidity increase by major institutions due to the 55 trillion cash on the sidelines and extraordinary central bank asset purchases has been inflating stocks prices.
Finally BlackRock says that they are looking forward to corporate data, as they will show whether these record levels are justified
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