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The White House outlined a proposal last week that would provide
$5.99 trillion in tax cuts, according to the first detailed
analysis of the plan by the non-profit Washington-based Tax
Policy Center.
"If they can get this tax plan passed it would revive inflation
because we would get growth," said Pat Keon, senior research
analyst for Thomson Reuters' Lipper research unit.
The arrival of a plan that could swiftly boost corporate profits
was not enough to galvanize reticent investors to buy stocks.
U.S.-based equity mutual funds and exchange-traded funds (ETFs)
posted $1 billion in outflows during the week ended October 4,
according to Lipper, curbing withdrawals of $9.7 billion the
week prior.
But fund flows showed flashes of the "reflation," or "Trumpflation,"
trade that drove financial markets after Donald Trump's surprise
U.S. presidential election victory last November. Trump's
promised tax overhaul initially sparked predictions that
debt-fueled economic growth and inflation could rise, pushing
the U.S. Federal Reserve to accelerate interest rate hikes.
Bond funds invested in government debt that pays out more when
inflation rises - which include Treasury Inflation-Protected
Securities, or TIPS - attracted $432 million during the week,
the most since March. Loan-participation funds, which buy debts
that yield more as rates rise, attracted $369 million, the most
since June. And financial sector funds pulled in $1.4 billion,
marking the largest week of inflows since July, according to
Lipper. Banks can earn more in interest from customers when
rates are higher.
Yields on 30-year benchmark U.S. government bonds rose from 2.77
on September 26 to 2.89 on Thursday. And the Fed has signaled an
expectation to raise the federal funds rate it controls one more
time this year. [FED/AHEAD]
Rate-sensitive Treasuries and real estate posted outflows during
the week. The government bond funds posted $270 million in
withdrawals, while the real estate sector funds posted $524
million in outflows, the most withdrawn since June, according to
Lipper. Safe-haven precious metals commodities funds posted $333
million in withdrawals, the first week of outflows since August.
Overall, taxable bond funds attracted $4 billion during the
latest week, marking a 13th straight week of inflows, Lipper
data for U.S.-based funds showed on Thursday.
(Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Cynthia Osterman)
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