March 8, 2018 / 11:21 PM / 10 days ago

UPDATE 1-Tariff tantrum hits U.S. stock funds in latest week

 (Adds analyst quote, details on funds, table, byline)
    By Trevor Hunnicutt
    NEW YORK, March 8 (Reuters) - U.S. fund investors pulled
$9.8 billion from stocks during the latest week, Lipper data
showed on Thursday, halting the investments' budding momentum
after February's selloff.
    The withdrawals, recorded during the seven days through
March 7, came as U.S. President Donald Trump announced plans to
impose import tariffs on steel and aluminum. The expected
tariffs were seen raising the likelihood of a trade war that
could stunt growth and stoke inflation.
    Before the trade measures, U.S.-based equity funds had taken
in cash for two straight weeks, following an early-February
selloff also tied to inflation fears.
    Following that 10 percent slide in the S&P 500 index,
these equity funds posted record withdrawals of $23.9 billion,
Lipper said.
    "Trump and the tariffs create more uncertainty," said Pat
Keon, senior research analyst for Thomson Reuters' Lipper
research unit. "We went through a mess of geopolitical tensions
last year, and the markets just kept going up and up and up.
They seemed impervious to it. This year, not so much."
    Real estate sector funds, seen as particularly vulnerable if
inflation forces the U.S. Federal Reserve to raise interest
rates aggressively, were hit by $577 million in withdrawals, the
most since June 2017.
    Bonds did not fare better, with taxable bond mutual funds
and exchange-traded funds (ETFs) overall recording $898 million
of withdrawals during the week, according to Lipper. Low-risk
money market funds took in $12.7 billion. Inflation erodes the
value of a bond's typically fixed payout.
    Meanwhile, cracks are showing in demand for some funds that
have been popular with investors.
    U.S.-based funds that invest in stock markets abroad, for
instance, have been a popular bet, drawing $176 billion in new
cash in 2017. 
    Yet during the most recent week, European-focused funds
posted their largest withdrawals since December 2017 and
Japanese-oriented funds recorded the most outflows since July
2017, with a combined $691 million pulled from both.
    Corporate investment-grade bond funds, which reeled in $227
billion in 2017, posted $740 million in withdrawals during the
latest week, the data showed. High-yield bond funds marked their
eighth week of outflows, with $525 million drained out of them. 
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          -9.803    -0.14     6,936.883  12,179
 Domestic Equities         -11.821   -0.25     4,720.338  8,668
 Non-Domestic Equities     2.018     0.09      2,216.545  3,511
 All Taxable Bond Funds    -0.898    -0.03     2,638.656  6,064
 All Money Market Funds    12.723    0.47      2,712.603  1,037
 All Municipal Bond Funds  0.407     0.10      401.757    1,476
 (Reporting by Trevor Hunnicutt
Editing by Jennifer Ablan and Leslie Adler)
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