April 4, 2018 / 8:52 PM / a year ago

U.S. fund investors cut stocks for 2nd straight week -ICI

    By Trevor Hunnicutt
    NEW YORK, April 4 (Reuters) - Investors gashed U.S.-based
stock funds, withdrawing billions of dollars for the second
straight week, Investment Company Institute (ICI) data showed on
    Stock mutual and exchange-traded funds (ETFs) in the United
States recorded $11.9 billion of withdrawals for the week ended
March 28, after $13.8 billion poured out the week prior, the
trade group's data showed.
    The possibility of a trade war between the United States and
China added to existing concerns weighing on investors about the
possibility that higher inflation and interest rates could
derail markets.
    President Donald Trump's administration signaled on
Wednesday that proposed U.S. tariffs on $50 billion in Chinese
goods may be a negotiating tactic in the escalating trade fight
in which China retaliated by targeting key American imports with
similar duties.
    Fritz Folts, chief investment strategist at 3EDGE Asset
Management LP, said his company reduced its exposure to the
equity market in the first quarter due to rising short-term
interest rates and the fact that markets started demanding a
higher premium for corporate bonds.
    "We are well positioned should equities continue to
struggle," he said.
    "What we need to pay close attention to is the possibility
of a 'snap-back' equity rally perhaps in response to a blow-out
corporate earnings reporting season. Should that occur then we
would need to reconsider perhaps putting equity exposure back on
in our strategies."
    Major companies start to report quarterly earnings this
month, with investors expecting strong profit growth. Wall
Street analysts expect first-quarter S&P 500 profits to
rise by 18 percent over the year before, helped by tax cuts
passed in 2017, according to Thomson Reuters I/B/E/S.
    In the meantime, markets are contending with temperamental
sentiment. Domestic stock fund outflows totaled $12.6 billion,
according to ICI.
    International stock funds, which have taken in money for 69
weeks straight, took in just $628 million during the latest
week, the least in nearly 15 months. Bond funds attracted $465
million, the lowest amount in six weeks.
    Commodity funds, which invest in assets including gold,
posted $332 million in withdrawals, the most cash pulled out of
that area of the market since February 2017.
    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in million of dollars):
               3/28     3/21     3/14    3/7      2/28/2018
 Equity        -11,926  -13,766  25,210  -6,440   11,714
    Domestic   -12,554  -17,107  19,062  -10,973  6,399
    World      628      3,341    6,148   4,533    5,315
 Hybrid        -1,311   151      -611    -500     -422
 Bond          465      5,315    8,446   1,524    5,181
    Taxable    336      4,546    7,743   1,310    5,071
    Municipal  129      769      703     214      110
 Commodity     -332     938      30      210      278
 Total         -13,104  -7,363   33,074  -5,207   16,751
 (Reporting by Trevor Hunnicutt
Editing by James Dalgleish)
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