Resurgent U.S. stock fund inflows show return of ‘Trump trade’

U.S. President-elect Donald Trump is broadcast on a screen on the floor at the NYSE in Manhattan, New York City
U.S. President-elect Donald Trump is broadcast on a screen on the floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. December 27, 2016. REUTERS/Andrew Kelly

February 17, 2017

By Trevor Hunnicutt

NEW YORK (Reuters) – Investors boosted their bets on U.S.-based equity funds in the latest week and helped extend market gains since the presidential election, Lipper data showed on Thursday.

Stock funds based in the United States attracted nearly $11.5 billion during the week ended Feb. 15, including $8.9 billion into funds invested domestically, the data showed.

That marks a sharp shift from the week before, when investors pulled $98 million from domestic stock funds, and a weakening interest in U.S. stocks since Donald Trump’s November election as president sparked a “Trump trade” rally late last year.

“Trump’s anti-trade rhetoric with China and Japan have lessened over the last week,” said Tom Roseen, head of research services for Thomson Reuters Lipper. “People are kind of going, ‘Hey, maybe he’s not going to be as radical’.”

Trump, who last month accused China and Japan of manipulating their currencies to give their exports an unfair advantage, made no public criticism of Japan’s monetary policies during or after an apparently friendly summit this past weekend with Japanese Prime Minister Shinzo Abe.

The rosy sentiment in funds comes as MSCI’s All-Country World index, a gauge of major world equity markets, hit a record on Thursday. By contrast, fund investors ignored strong equity markets last year, pulling $71.5 billion from U.S.-based stock funds as that ACWI index returned 7.7 percent, according to the Investment Company Institute, a trade group.

In another throwback to popular post-election trades, financial sector funds attracted $1.9 billion in the latest week, their largest inflows since November. Banks are expected to profit if Trump and his Republican party, which controls both houses of the U.S. Congress, deliver on promises to trim corporate taxes and banking regulations.

In a continuation of trends developing in the past few weeks, international stocks continued to attract cash, gathering $2.5 billion for the second week in a row.

Investors added $1.5 billion to emerging-market stock funds, their seventh straight week of inflows and the largest since last August.

Taxable bond funds attracted $4.9 billion, their seventh straight week of attracting cash, the data showed.

“We’re seeing a two-trick pony, with equity markets rising, and taxable bond funds taking in money as well,” said Roseen. “It was a pretty good week; the inflows show it.”

U.S.-based corporate investment-grade bond funds attracted $3.1 billion over the weekly period, the group’s ninth straight week of inflows, while high-yield junk bond funds posted their third straight week of inflows.

(Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and Cynthia Osterman)