Investors pull cash from stock funds ahead of Trump inauguration

NEW YORK (Reuters) - Investors pulled $3.1 billion from U.S.-based stock funds over the last week, Lipper data showed on Thursday, showing a waning appetite for risk ahead of Donald Trump’s inauguration as U.S. president.

Traders work on the floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., January 19, 2017. REUTERS/Stephen Yang

The withdrawals are a first for U.S. stock funds this year, according to Lipper. The funds had been buoyed by Trump’s November U.S. presidential election victory and the surprising equity rally that followed.

The Russell 2000 index of relatively small public U.S. companies has returned nearly 13 percent since the election.

Yet during the latest week, U.S. funds that buy shares in domestic companies posted $5.2 billion in withdrawals. By contrast, international stock funds added $2.1 billion.

“This could be the Trump rally coming to a natural end,” said Pat Keon, senior research analyst at Thomson Reuters Lipper, “as the hard work of governing the country starts to come into play.”

“We’ve seen some reversals of trends we’ve seen since the election,” said Keon.

In a note on Wednesday, the managers of BlackRock Inc’s largest mutual fund, the $41 billion Global Allocation Fund, warned U.S. stocks are trading at “elevated” prices, potentially based on an overly optimistic view of the new administration’s stimulus plans. They said they see greater value in Japan and Europe.

Trump, who takes office on Friday, also said the U.S. dollar is “too strong” in an interview in the Wall Street Journal on Monday, raising questions about what the president-elect might do to halt its rise.

Precious metals commodities funds, which invest in dollar-sensitive gold, attracted $138 million in their first week of inflows since the U.S. election.

But bank sector funds, which reported strong performance after the election, posted $609 million in withdrawals after three straight weeks of inflows.

Loan-participation funds, which pay out more as interest rates rise, took in $548 million in their 10th straight week of inflows as the U.S. Federal Reserve has promised further rate hikes in 2017.

Overall, U.S.-based taxable bond funds attracted $1.5 billion in their third straight week of inflows during the seven days through Jan. 18, the data showed, with corporate debt funds being especially in demand.

Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and Cynthia Osterman