U.S. equities suffer longest outflow streak since 2004: BAML

LONDON - 25 August 2017: U.S. equity funds have suffered their longest outflows streak since 2004, Bank of America Merrill Lynch (BAML) data showed on Friday.

Investors have been losing faith that President Donald Trump can deliver on his ambitious tax cut and spending campaign pledges.

The data, which tracks fund flows from Wednesday to Wednesday, showed investors pulled $2.6 billion from U.S. stocks over the last week, with tech stock funds losing $600 million, their biggest outflows in almost a year.

The S&P 500 .SPX is down over 1 percent so far this month, having rallied almost 9 percent year-to-date, whilst U.S. tech stocks .SPLRCT have surged over 22 percent so far this year.

But investors have grown increasingly concerned about stretched U.S. equity valuations, with Trump’s inability to usher legislation through Congress raising doubts about his campaign promises to cut taxes and boost spending.

Last week Trump dismantled two of his business advisory groups after several chief executives quit following his response to racially charged protests in Charlottesville, Virginia. This further eroded confidence in Trump’s ability to enact his reforms.

A late-September deadline is now looming for U.S. officials to raise the debt ceiling or risk default, leading investors to anticipate a volatile month.

“Since late June investors have withdrawn $30 billion from U.S. funds while adding $36 billion to the rest of the world,” said BAML’s analysts, citing inflows to emerging markets, Europe and Japan.

Japanese equities attracted $3.1 billion over the week, their biggest inflows in five months, whilst emerging markets pulled in $200 million.

Emerging market equities continued to top BAML’s table of cross-asset winners in 2017, returning 27.1 percent year-to-date in dollar terms. European equities were in third place, delivering 18.7 percent, but suffered their first outflows in seven weeks, losing $200 million.

Overall, global equities attracted $3.1 billion, whilst bond funds pulled in $5.5 billion, with government bond and Treasury funds enjoying their largest inflows in 10 weeks at $900 million.

Investment grade corporate bonds continued to attract the lion's share of the fixed income flows, pulling in $5 billion, whilst emerging market debt funds attracted $1.9 billion. High yield bonds suffered their second straight week of chunky outflows, losing $2.2 billion.