Tech Exodus Fuels Rotation Into Bonds and Materials

The biggest money flow story this week is a sharp reversal in Technology. Over three months, Information Technology pulled in a net $73.9B — the dominant sector trade. This week, it flipped to a $3.3B net outflow. Selling pressure is real, with a flow imbalance of just 40.4.

That rotation is landing in two places. Materials drew $2.1B net this week, matching its entire three-month haul of $2.1B in a single week. Industrials added $900M. Both sectors show flow imbalances above 65, signalling clear buying pressure.

Geography: US Leads, China Slumps

The US remains the dominant destination. It pulled $13.9B net this week. That follows $363.3B over the past three months. The flow imbalance sits at 55, suggesting continued but not frenzied buying.

The sharpest reversal is China. Over three months, China attracted $20.9B net. This week it shed $9.8B net, with a flow imbalance of just 20.9 — deep in sell territory. That is a dramatic turn from a trend that looked constructive just weeks ago.

Japan held firm with $6.4B net inflows this week. Its three-month haul of $140.3B confirms it remains a structural favourite. Global Ex-US ETFs also held strong, with a flow imbalance of 97.7 — nearly all buying, almost no selling.

Sector Rotation: Materials Up, Energy Still Bleeding

Energy saw $476M net outflows this week. Over three months, the sector lost $6.9B net. That is a consistent and accelerating theme. Consumer Discretionary gained $444M this week after a tepid $900M over three months — a modest improvement in sentiment.

Health Care saw $242M net this week. But the three-month picture ($7.4B net) is far stronger, suggesting last week's flows represent a deceleration rather than a reversal.

Asset Class and Strategy: Bonds Join the Rally

Equities dominated with $24.1B net this week. Fixed Income added $16.9B — a notable parallel move. Over three months, bonds attracted $246.6B net, a steady and sizeable allocation. Investors are not choosing between equities and bonds. They are buying both.

Commodities flipped this week. After shedding $29B net over three months, they pulled in $4.5B this week. That weekly bounce may reflect short-covering rather than a directional shift.

On strategy, Active ETFs continued their strong run. $7.4B net flowed in this week. Over three months, Active strategies attracted $223.8B. Vanilla passive flows turned negative this week at -$5.6B, despite commanding $404.8B over three months. Growth strategies reversed from +$10.4B over three months to -$368M this week, in lockstep with the Tech sell-off.

The overall tone is cautious rotation — out of momentum trades, into defensives, bonds, and non-US developed markets.