U.S. stock funds attract most cash since 2014: Lipper

Traders work on the floor at the New York Stock Exchange (NYSE) in Manhattan, New York
Traders work on the floor at the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., December 28, 2017. REUTERS/Andrew Kelly

December 28, 2017

By Trevor Hunnicutt

NEW YORK (Reuters) – Investors poured $24.1 billion into U.S.-based stock funds in the week to Dec. 27, Lipper said on Thursday, sending a gift to equity markets already on pace to record a year of double-digit percentage gains.

This marks the largest week of inflows for mutual funds and exchange-traded funds (ETFs) collectively since December 2014, according to the Thomson Reuters research service, and comes after U.S. lawmakers finalized a massive corporate tax cut that markets admired.

Cash is also shuffling around during a typically active period for funds, despite holidays, as investors plan for taxes and report end-of-year performance statistics. Equity fund outflows totaled $22.2 billion the week prior.

The flow result counters the dominant trend in U.S.-based funds this year – a reticence to buy stocks at home despite an S&P 500 index poised to deliver a 2017 return of more than 20 percent.

Domestic stock funds posted an estimated $23.4 billion in outflows for the year, according to Lipper, compared to $165 billion inflows for their counterparts invested abroad and $283 billion inflows for funds for taxable bonds.

“You see people attracted to equities, but they’re not backing up the truck to buy equities at 20-times earnings,” said David Lafferty, chief market strategist at Natixis Investment Managers, referring to the seemingly rich price-to-earnings ratio of the S&P 500. “I don’t see any euphoria.”

This week, though, domestic equity funds pulled in nearly $18 billion, compared to $6.4 billion to their internationally oriented peers, according to Lipper.

Healthcare stock funds, however, posted their seventh straight week of outflows. The U.S. tax bill repealed a requirement that most Americans have insurance or face penalties.

Taxable bond funds were hit with a rare week of withdrawals. High-yield bonds, invested in more speculative corporate debt, recorded $240 million in outflows during the week, Lipper said, while lower-risk Treasury funds pulled in $567 million. Money-market funds, where investors park cash, took in $19.3 billion.

Funds based in the United States but focused on Chinese stocks took in $408 million during the week, the largest inflows since June 2015, during a week in which strong demand for copper seemed to presage growth in the emerging market and around the world. [MKTS/GLOB]

(Reporting by Trevor Hunnicutt; Editing by Richard Chang and James Dalgleish)