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UPDATE 1-Investors favor stock funds over bonds, reversing 2016 trend
December 29, 2016 / 11:19 PM / a year ago

UPDATE 1-Investors favor stock funds over bonds, reversing 2016 trend

(Adds details on mutual funds and ETFs, analyst quote, table,
    By Trevor Hunnicutt
    NEW YORK, Dec 29 (Reuters) - U.S.-based stock funds pulled
in $11.8 billion in the week ended Dec. 28, data from Lipper
showed on Thursday, ending 2016 with an enthusiasm for stocks
that had been lacking for the better part of the year.
    Investors pulled $775 million from taxable bond mutual funds
and exchange-traded funds during the same period, marking the
third straight week of withdrawals, the data showed.
    Stocks have rallied on the potential for lower U.S.
corporate taxes and fewer regulations, after the Nov. 8 election
gave Republicans who support those policies control of the
presidency and the U.S. Congress.
    The Russell 2000 has gained more than 14 percent
since then, while the Dow Jones Industrial Average flirts
with a symbolic 20,000 milestone.
    "We probably could see this trend continue through the end
of the year and then into the inauguration," said David Mazza,
head of ETF and mutual fund research at State Street Global
Advisors. "Then, from there, it's what will those first
100 days look like."
    President-elect Donald Trump will take office on Jan. 20.
    This week's stock fund inflows and bond withdrawals mark a
sharp departure from most of 2016.
    U.S.-based stock funds posted $61.8 billion in withdrawals,
while bond funds attracted $247.4 billion, according to 2016
data through November, according to the Thomson Reuters Lipper
research service. The data show only 12 weeks this year when
stock funds netted cash, compared to 32 weeks for taxable bond
    Government spending expected under the incoming
administration could spark inflation and depress bond prices.
    Fund investors have been reluctant to abandon bonds
    "There's still been some very nice flows into fixed-income
ETFs," Mazza said in an interview before the latest data were
    Taxable bond ETFs took in $798 million in the latest week,
while their mutual fund counterparts posted $1.6 billion in
    Mutual funds are seen to reflect retail investors' moves,
while ETFs represent a range of investors, including
institutions such as hedge funds.
    The following is a breakdown of the flows for the week,
including ETFs:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          11.841    0.22      5,339.951  11,501
 Domestic Equities         10.844    0.28      3,840.822  8,207
 Non-Domestic Equities     0.998     0.07      1,499.129  3,294
 All Taxable Bond Funds    -0.775    -0.03     2,266.614  5,823
 All Money Market Funds    11.165    0.48      2,335.886  1,016
 All Municipal Bond Funds  -1.637    -0.46     352.510    1,371
 (Reporting by Trevor Hunnicutt; Editing by Matthew Lewis)

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