Tech Fund Outflows Tell A Story

Capital Flows In/Out of Tech Funds Have Been A Leading Market Indicator

TECH FUND OUTFLOWS ACCELERATING

Capital flows into tech funds coincided with the peak in investor euphoria earlier this year.

Since that time, they declined sharply and are trending negative at the highest rate since late 2018.

Outflows from tech funds acted as an early indication of broad market weakness in the fourth quarter of 2018.

Capital flows of tech funds are important to monitor, as tech-related stocks comprise a major component of both the Nasdaq and S&P 500. The 5 largest weightings of the S&P 500, which represent over 20% of the index, are all tech related.

Tech shares, therefore, can be counted on to lead both bull and bear markets.

The size of the change in tech capital flows, and the swiftness of the change is concerning and warrants ongoing attention.

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