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UPDATE 1-U.S. fund investors pull back from 'Trump trade'
March 23, 2017 / 11:25 PM / 9 months ago

UPDATE 1-U.S. fund investors pull back from 'Trump trade'

 (Adds details on mutual funds and ETFs, analyst quotes, table,
byline)
    By Trevor Hunnicutt
    NEW YORK, March 23 (Reuters) - Investors eased off from
"Trump trade" bets during the latest week, snatching the most
money from bank sector funds in more than a year and stockpiling
bonds, Lipper data for U.S.-based funds showed on Thursday.
    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.
    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. 
    Trump on Thursday failed to close the deal with lawmakers on
how to dismantle Obamacare, forcing the House of Representatives
to delay a vote on a healthcare bill that was supposed to be his
first legislative win.
    "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.
    Banks were set to prosper under an administration pushing
infrastructure spending along with cuts to taxes and regulation.
    A hawkish response by the U.S. Federal Reserve was expected
to keep interest rates rising, boosting bank earnings but
keeping Treasuries under severe selling pressure.
    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.
    Overall, stock funds posted $1 billion in net withdrawals,
the first week of outflows since January. Despite that, 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, 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, according to Lipper.
    Turnill said some international markets have grown more
attractive given the uncertainty around U.S. stocks and their
relatively high prices.
    High-yield bond funds stanched their bleeding after three
weeks of outflows, attracting $736 million during the latest
week, the research service said.
    The following is a broad breakdown of the flows for the
week, including mutual funds and exchange-traded funds:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          -1.023    -0.02     5,728.277  11,744
 Domestic Equities         -4.843    -0.12     4,071.302  8,388
 Non-Domestic Equities     3.820     0.23      1,656.975  3,356
 All Taxable Bond Funds    8.268     0.35      2,351.811  5,926
 All Money Market Funds    -17.233   -0.74     2,305.904  1,036
 All Municipal Bond Funds  0.173     0.05      372.067    1,409
 
 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Lisa Shumaker)
  

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