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U.S. stock market gets relief from strong fund flows - trade group
June 21, 2017 / 6:22 PM / 7 months ago

U.S. stock market gets relief from strong fund flows - trade group

    By Trevor Hunnicutt
    NEW YORK, June 21 (Reuters) - U.S. stock fund flows
rebounded in the latest week, providing succor to markets after
multibillion dollar withdrawals in the prior week, data from
trade group Investment Company Institute (ICI) showed on
    Equity funds based in the United States pulled in $27.3
billion during the week ended June 14, driven chiefly by demand
for exchange-traded funds (ETFs). Debt funds attracted $7.7
billion in their 25th straight week of inflows, ICI said.
    Mutual funds are heavily favored by retail investors, while
ETFs draw an increasingly diverse set of clients, including
fast-trading hedge funds.
    The heavy buying helped take the pressure out of a market
grappling with weaker oil prices, soft economic data, a rotation
out of go-go technology names and an interest rate hike by the
U.S. Federal Reserve, the second this year. Stock fund outflows
were $7.7 billion the week before.
    Yet market volatility has remained below its historical
    "There's a lot of complacency in the market," said Neil
Constable, head of the global equity team at GMO LLC. "It feels
a lot like late 2006, early 2007."
    In recent weeks the spread between short and long-term U.S.
government bonds has narrowed, a "curve flattening" that could
portend lower economic growth and inflation forecasts. The yield
curve between five-year notes and 30-year bonds
flattened to 96 basis points, the narrowest since December 2007.
    Constable said fast-rising growth stocks have become
increasingly expensive and investors should favor higher-quality
shares that could hold up better if a market downturn comes.
    Yet, by contrast, falling yields and a sinking premium for
long-term bonds could boost growth stocks further. In that case,
"this reach for yield trade, and this reach for growth trade,
will continue to manifest," Constable said.
    The following table shows estimated ICI flows for mutual
funds and exchange-traded funds (all figures in millions of
               6/14      6/7    5/31    5/24  5/17/2017
 Equity      27,288   -7,726  13,999    -828      4,356
 -Domestic   19,624  -11,093   8,482  -5,487     -5,604
 -World       7,664    3,367   5,517   4,659      9,961
 Hybrid        -753     -861    -272    -213       -317
 Bond         7,665   13,621   4,920   8,012     10,381
 -Taxable     7,089   12,305   4,675   7,347      9,791
 -Municipal     576    1,316     245     665        590
 Commodity       65      997    -458    -152       -150
 Total       34,264    6,030  18,189   6,819     14,271
 (Editing by Jeffrey Benkoe)

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