February 23, 2017 / 11:51 PM / 3 years ago

Charmed by U.S. tax plans, investors buy stock, bond funds

NEW YORK (Reuters) - Investors are showing increasing comfort wading into the markets, lavishing cash on U.S.-based stock and corporate bond funds in the latest week, Lipper data showed on Thursday.

Those stock funds attracted $2.7 billion during the week ended Feb. 22, their fourth consecutive week of inflows, and taxable bond funds took in another $4 billion, the research service’s data showed. The bond funds have gathered money for eight straight weeks.

U.S. President Donald Trump, in an interview on Thursday with Reuters, spoke favorably about a tax proposal that could cut corporate tax rates and exempt U.S. export revenues from federal taxes but impose an implicit 20 percent tax on imports.

Pat Keon, senior research analyst for Thomson Reuters Lipper, said markets are increasingly charmed by tax cut and deregulation proposals touted by Republicans, including Trump.

“There’s a lot of enthusiasm in the markets for that, a lot of positive investor sentiment,” said Keon.

“It seems like every day there’s another mini-controversy in the news about things not related to the economy, and it seems to be holding the administration back from getting going on the economy,” Keon said. “You wonder how long the markets and investors will keep waiting.”

For now, the optimism continues, with $2.6 billion moving into investment-grade bond funds, their 10th straight week of inflows. High-yield bond funds attracted $726 million, Lipper said.

The lion’s share of money in stock funds has moved into exchange-traded funds.

For the week, stock ETFs attracted $2.9 billion while mutual funds posted withdrawals of $176 million. Mutual funds are seen to represent retail investors’ moves, while ETFs reflect a range of investors, including institutions such as hedge funds.

The U.S. Federal Reserve released the minutes of its last policy meeting on Wednesday, which showed its officials believe it may be appropriate to raise interest rates again “fairly soon” should jobs and inflation data come in line with expectations.

Investors withdrew cash from energy stock funds and interest rate-sensitive utilities and real estate funds over the last seven days, while shuffling more money into banks and technology, the data showed.

Overall, demand for stock funds was roughly evenly split between funds that invest at home and those that invest abroad.

The following is a broad breakdown of the flows for the week, including mutual funds and exchange-traded funds:

Sector Flow Chg Pct of Assets($ Count

($ blns) Assets blns)

All Equity Funds 2.745 0.05 5,770.808 11,823

Domestic Equities 1.389 0.03 4,130.341 8,437

Non-Domestic Equities 1.355 0.08 1,640.467 3,386

All Taxable Bond Funds 3.987 0.17 2,372.818 5,949

All Money Market Funds 3.964 0.17 2,346.829 1,037

All Municipal Bond Funds 0.149 0.04 371.216 1,409

Reporting by Trevor Hunnicutt; editing by Jennifer Ablan and Jonathan Oatis

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