June 19, 2020 / 10:19 AM / 25 days ago

Healthcare funds see record outflows on 'election noise': BofA

LONDON (Reuters) - Healthcare stocks saw a record $2.6 billion in redemptions in the week to Wednesday on “U.S. election noise”, BofA said on Friday, as investors turned their attention to the pivotal November vote.

FILE PHOTO: A staff member works at a trader station as preparations are made for the return to trading at the New York Stock Exchange (NYSE) in New York, U.S., May 22, 2020. REUTERS/Brendan McDermid

The presidential election will be a risk factor for markets after a shift in polls that has seen President Donald Trump lose ground to Democrat Joe Biden. A Biden victory could threaten policies championed by Trump and generally favoured by Wall Street.

Outflows from healthcare stocks could also in part be due to profit-taking after the sector’s strong outperformance year-to-date as defensive stocks were largely insulated from the coronavirus-led shocks.

Equity funds in general fell out of favour with $6.4 billion being pulled out as an increase in pockets of rising coronavirus infection numbers in the U.S. curbed risk appetite. Bonds meanwhile saw inflows of $15.4 billion.

Money market funds, which saw a record $1.2 trillion inflows year-to-date, continued to see redemptions with $16.4 billion going out as investors favoured bonds over cash, BofA’s data crunching for the week to June 17 showed.

“Cash heading into bonds not stocks,” BofA said, pointing to $3.5 billion flowing out of European stocks and a combined $3.3 billion leaving financials and U.S. value stocks, firms whose fundamental worth is not reflected in their share price.

Stock markets have been wobbly recently after having reduced COVID-19 related losses to less than 10% aided by a combined 134 interest rate cuts by central banks around the world and stimulus measures worth well over $18 trillion.

“After a 30%+ rally since mid-March, the market is caught between signs of a strengthening macro recovery, on the one hand, and concerns about a rise in Covid-19 cases in some US states, on the other,” BofA said in a note.

(GRAPHIC - Global market asset performance QTD, YTD: here)

Reporting by Thyagaraju Adinarayan; Editing by Catherine Evans and Hugh Lawson

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