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The latest evidence that rumors of Trumpflation trade’s death are not greatly exagerated came overnight from Bank of America which reported that based equity funds saw net outflows of $8.9 billion, the largest in 38 weeks. The most impacted sector was, not surprisingly, banks – the biggest beneficiary of the post-Trump election victory rally, which suffered the biggest outflows in over a year.
Where was the withdrawn money paked? The usual place: bonds. According to Lipper, U.S.-based taxable bond funds absorbed $8.3 billion in cash during the week ended March 22, the most in eight months, while investors withdrew $1.3 billion from financial sector funds in the worst week of net sales for those funds since July 2015, Lipper said.
As Reuters notes, in both cases, the latest week’s results are an about-face from the popular trades that followed U.S. President Donald Trump’s election victory in November and come as investors questioned whether the new U.S. administration can soon deliver the fiscal and regulatory changes needed to support the “Trump trade” of higher equity prices and rising bond yields. The bearish-bond and bullish-bank trades have both diminished since November, and on Tuesday investors delivered a body blow to U.S. stocks and fled to safe-haven bonds. The S&P 500 and Dow Jones Industrial Average indexes lost over 1 percent that day in their worst one-day performances since before Trump’s election victory.
“As investors have become more skeptical or wary of the ability of the president to drive through his policy agenda that’s started to have negative impact on some of the areas in the U.S. which had benefited from that hope,” said Richard Turnill, BlackRock Inc’s global chief investment strategist.
While investors fled the US, they remain optimistic on EMs and Europe: while overall stock funds posted $1 billion in net withdrawals, the first week of outflows since January, equity funds invested abroad attracted $3.8 billion in the largest haul since December 2015. Emerging markets stock funds attracted $2.2 billion in their best week since August 2016 according to Lipper, while European stock funds gathered $636 million in their best week since December 2015. Japanese stock funds posted $593 million in withdrawals, their largest outflows since last July.
More details from the BofA report, broken down by region (EPFR not Lipper):
By investment style:
By sector:
On the FICC side, the biggest winners continue to be EM debt and gold and silver, while Junk bonds remain the most impacted.
Finally, some more insight from Michael Hartnett:
Risk-off week for flows
The TARP moment
Where’s the Beef?
New theme: synchronized monetary tightening