The present investing scenario across the globe has turned a bit tricky. The U.S. economy is better-positioned, while several other developed economies are lagging. Due to upbeat economic fundamentals, the Fed has embarked on a tighter monetary policy, which in turn has resulted in a stronger dollar and rising Treasury bond yields. Such Fed moves have weighed on emerging market currencies as well as economies.
Meanwhile, there has been an acute political crisis in Turkey due to worries surrounding president Tayyip Erdogan’s influence over monetary policy and the country’s a worsening relationship with the United States. The problem is so deep-rooted that it has rattled the global investing world.
As a result, investors yanked money from both stock and bond funds in the past week, and piled that in U.S. equities from safe sectors. Per Bank of America Merrill Lynch, about $3.6 billion was pulled out from equity mutual funds and ETFs, of which $2.6 billion was U.S. equities, as quoted on CNBC.
Thanks to rising rate concerns, investors had to dump government debt. There were net outflows of $1.5 billion from Treasuries and government bonds marking “the biggest since December 2016.” Investors also got rid of gold, which is down $500 million due to a jump in the U.S. dollar.
Fund Managers Overweight on U.S. Equities
All these outflows happened when monthly fund managers’ survey indicated the $2.6 billion was U.S. equities since January 2015, as quoted on CNBC. Now the question is where did all the money go?
According to Bank of American Merrill Lynch (BofA), some sectors scored high in the past three months, in terms of inflows and all of $2.6 billion was U.S. equities.
Why Defensives Rule?
The past three months were all about trade tensions mainly between the United States and China, Turkey crisis, uncertainty pertaining to central banks’ decisions and emerging market currency crisis. Naturally, investors sought shelter under safe havens.
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