NEW YORK (Reuters) - U.S. fund investors pivoted from domestic stocks to bonds and international equities during the latest week, Lipper data showed on Thursday, amid upheaval for the Trump administration and fears that Washington will not enact market-boosting policies.
Investors pulled $6 billion from domestic-focused stock funds in the week ended Wednesday, a third straight week of outflows.
“It was basically a flat, non-eventful week, until yesterday when all hell broke loose,” said Pat Keon, senior research analyst for Thomson Reuters’ Lipper unit.
The S&P 500 and the Dow Jones Industrial Average notched their biggest one-day fall since Sept. 9 on Wednesday as investor hopes for tax cuts and other pro-business policies faded after reports that President Donald Trump tried to interfere with a federal investigation. Stocks recovered some ground on Thursday.
U.S.-based funds that buy equities abroad and taxable bond funds both avoided the selloff, reeling in cash for the ninth straight week.
Non-domestic stock funds pulled in $4.8 billion, while taxable bond funds gathered $4.4 billion, Lipper said.
“It’s just the thought that the U.S. is overbought,” said Keon. “They’re looking for other growth stories out there.”
Stock funds focused on emerging markets absorbed $1.5 billion, while their bond counterparts took in $559 million. In both cases, they feasted on the most new cash since March.
Those markets hit a late-week snag, however.
Brazilian markets plummeted on Thursday as allegations that President Michel Temer condoned bribes to silence a key witness deflated investor optimism about the prospects for his ambitious pension and labor reform agenda.
That weighed on emerging markets broadly. The iShares MSCI Brazil Capped ETF sank 16 percent in its worst showing since the 2008 financial crisis. The iShares MSCI Emerging Markets ETF fell nearly 2 percent.
Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and Cynthia Osterman