Half Last Week's Record Stock Inflows Just Got Yanked Back Out

(Bloomberg) -- Even before the ramp up in global trade tensions on Thursday, investors were heading for the exit from risky assets, just one week after plowing a record amount of money into the stock market.

Some $19.9 billion was withdrawn from equity funds in the week to March 21, Bank of America Merrill Lynch said in a report, citing EPFR Global fund flow data. The U.S. saw the brunt of the selling with $24.9 billion pulled from American stocks. High-yield bond funds were also in the cross-hairs with an outflow of $1.6 billion, the 10th straight week of redemptions.

Market participants faced a deluge of catalysts this week as Federal Reserve officials raised the benchmark lending rate a quarter point and forecast a steeper path of hikes in 2019 and 2020, citing an improving economic outlook. Yet concerns about increasing protectionism were justified, as President Donald Trump imposed tariffs on at least $50 billion in Chinese imports, sparking an initial $3 billion in reciprocal measures from China.

Still, investors are not positioned for a trade war, according to Merrill Lynch’s strategists. Japanese equities enjoyed a 16th straight week of inflows at $1.9 billion, while $2 billion was added to emerging-market stock funds.

The dialing back of risk appetite was also evident elsewhere. Investment-grade bond funds gained $1.4 billion of new money, and government bond funds were also net gainers, receiving $1.5 billion, according to the report. Precious metal funds gained $1.5 billion.

©2018 Bloomberg L.P.

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