Cash is King for U.S. fund as Investors Wary of US Equities

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The “discounts” that current stock prices reflect are substantial – and represent a spectacular global investing opportunity. As these uncertainties are resolved, the market will resume its climb, propelled by global synchronic growth and strong corporate earnings. Indeed, if these risks do not materialize into greater problems, prices should run up very strongly, as I soon expect. As for now, the market is massively oversold – and rife with opportunity. Let’s dismantle this Wall of Worry, brick by brick… Inflation Is A Trailing Indicator As Fed Chairman Bernanke recently stated to Congress, since the U.S. economy is showing unequivocal signs of cooling off and inflationary expectations remain contained, the slowdown will bring core inflation down to the 1%-2% range that the Fed is comfortable with. (The slowdown is already underway, thanks to higher interest rates – from 1% to 5.25%.) In the meantime, the Fed can refrain from increasing interest rates further (since monetary tightening works with lags), and it can monitor the situation to ensure that inflationary expectations remain anchored. The Fear of Excessive Fed Tightening We tasted a prelude of what happens in the markets when this fear subsides. We enjoyed a sharp rally when Bernanke testified in front of Congress his view of a U.S. economic non-inflationary soft landing. The Dow raced 212 points higher, for a one-day 2% gain. The iShares MSCI Emerging Market Index (AMEX: EEM) climbed a quick 6%. Bernanke’s views are very similar to my own: The U.S. economy will slow down to trend growth of around 3%; inflation will drop to the comfort zone as a result; and the housing market will cool off significantly, but will not blow up. This scenario is not only the most probable, but also the most desirable, since the economy’s risk of a recession is quite considerable, now that the consumer is overleveraged. Therefore, I believe that the Fed will go to great efforts to ensure that the U.S.

Technology sector funds posted $427 million in outflows, their withdrawals in seven weeks. High-yield bond funds listed $1 billion Lipper said.

Money market funds, designed to maintain their cash value even when markets falter, brought $24.6 billion during the week ended Aug 23. The products are on pace for their monthly inflows having drawn $69 billion during August, Lipper said.

Loan participation funds, invested in debt which yields listed $377 million in outflows their withdrawals in about 14 months.
Investors’ risk-averse change came as the S&P 500 was struck by a 1.5 percent selloff last Thursday, the kind of setback that has grown increasingly rare as U.S. stocks prepare to claim a ninth straight year of positive total returns.

Reporting by Trevor Hunnicutt reporting by Kimberly Chin; Editing by Andrew Hay and James Dalgleish
Equity funds, which brought $996 million in the most recent week, have recorded outflows only four weeks this year, according to Lipper. Investment-grade debt funds haven’t seen a single week of outflows in 2017, pulling in $3.3 billion during the most recent seven-day period.

Published at Fri, 25 Aug 2017 01:06:15 +0000

NEW YORK (Reuters) – Investors socked savings off and opted against loading up on U.S. stocks during the most recent week, Lipper data for U.S.-based funding showed on Thursday.

Meanwhile bets on inflation and rising rates are evaporating as policymakers convene for a summit in Wyoming.

Yet funds invested in certain types posted $300 million in outflows throughout the week, the most.
Fund flows show more confidence in high-rated bonds and worldwide stocks than in stocks.
Investors are wary of whether tax reform and other promised U.S. government policies will come to fruition and raise markets further, said Pat Keon, senior research analyst for Thomson Reuters’ Lipper unit. A late-September deadline also loomed for U.S. officials to raise the amount of money the government can borrow, or risk default.

Central bankers have kept developed economies’ interest rates near historic lows to stoke growth, and inflation has fallen short of amounts that would push them to make a radical change. The value of a bond hurts.

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