Flows & Liquidity_Hopes for 60_40 funds into 2025

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the Global Markets Strategy as presented by J.P. Morgan on December 11, 2024. The focus is on market flows, liquidity, and investment strategies across various asset classes, including equities, bonds, and cryptocurrencies. Core Insights and Arguments 1. Shift in Fund Flows: - There are tentative signs of a shift to negative equity-bond correlations, which may lead to a reversal of outflows from balanced/mixed funds, particularly benefiting developed market (DM) equities and corporate bonds [2][3][16]. - Balanced/mixed funds have experienced significant outflows since Q2 2022, averaging around $50 billion per quarter in 2022 and $72 billion per quarter in 2023, but these outflows have moderated in 2024 [3][16]. 2. Performance of Hedge Funds: - Strong gains were reported across all hedge fund categories in November, with Equity Long/Short hedge funds showing particularly strong performance [39]. - The elevated equity exposure of these funds indicates a shift towards risk-taking following the U.S. elections [39]. 3. Japanese Market Dynamics: - The "BoJ trade" has been re-invigorated following Trump's election, with investors favoring long positions in Japanese equities and banks while shorting the yen and Japanese government bonds (JGBs) [49]. - The probability of a rate hike by the Bank of Japan (BoJ) has decreased significantly, impacting investor sentiment [49]. 4. Chinese Equities: - Discretionary speculative investors are increasing their exposure to Chinese equities, despite a consensus that Trump's win would negatively impact these stocks [60]. - There has been a notable improvement in the liquidity of HSCEI futures compared to CSI300 futures over the past two months [60][78]. 5. Bitcoin Mining Trends: - Bitcoin miners are adopting strategies similar to MicroStrategy, focusing on accumulating bitcoins rather than selling them to cover operational costs [89]. - The total equity raised by bitcoin miners in 2024 has exceeded $10 billion, surpassing the previous high of $9.5 billion in 2021 [92]. Additional Important Insights - The Cross Asset Positioning Monitor indicates high equity, bitcoin, gold, and long dollar exposures, with underweights in emerging market (EM) equities and bonds [39]. - The liquidity of HSCEI futures has improved significantly compared to CSI300 futures, indicating a potential shift in market dynamics [78]. - The performance of balanced/mixed funds may improve if they can reverse their underperformance against benchmarks, particularly if negative equity-bond correlations persist [16]. This summary encapsulates the key points discussed in the conference call, highlighting the evolving market dynamics and investment strategies across various asset classes.