‘Trump trade’ drives ninth biggest weekly rush to stocks
$63 billion has flowed to shares since election
LONDON (Reuters) – Global equity funds received $21 billion in the past week – their ninth-biggest inflow ever – as investors embraced the “Trump trade,” while money flowed out of bonds for seventh week in a row, Bank of America Merrill Lynch said on Friday.
The BAML figures, which track flows through Wednesday, showed overall equity inflows of $63b. since Donald Trump’s US presidential election win on November 8, partially reversing the $151b. outflows seen from January to October.
The bulk of the latest gains in the past week came from an $18.5b. rush into US stocks, but European and emerging equity funds also saw inflows of $700 million and $1b., respectively, the data showed.
“Forced buying means the risk rally is broadening; [there are] rising inflows to laggards,” analysts at the bank added.
Materials, financial, energy and industrial firms have seen the biggest boost since Trump’s victory, with ETF holdings of materials assets up 25% and more than a fifth for financials.
Bond funds, however, saw a $4.4b. exodus for their longest losing streak in three years, while gold lost $700m. Emerging debt funds lost $1.2b. for their sixth week of outflows.
But in line with the enthusiasm for reflation trades, almost $5b. moved into riskier high-yield bonds – the most in nine months – while inflation-linked securities, Treasury Inflation Protected Securities, or TIPs, received $300 million for their 25th week of inflow out of 27.
BAML said there were still “winter risk” worries about a potential sharp fall in China’s currency and another spell of outflows from the world’s second-largest economy. The yuan has hit 8-1/2-year lows to the dollar while local bond yields spiked last week.
“Risks of sharper devaluation of China currency plus trade and geopolitical tensions with the United States are keeping clients long US and Japan, short Europe & emerging markets and preventing ‘full capitulation’ into risk assets,” BAML added.