Investors book profits from U.S.-based equity funds ahead of Fed meeting

[July 27, 2019]    By Jennifer Ablan

(Reuters) - U.S.-based equity funds posted more than $8.4 billion of cash withdrawals in the week ended Wednesday, following two weeks of inflows, according to Refinitiv's Lipper.

The withdrawals came ahead of next week's Federal Reserve meeting. In the same week, U.S.-based money-market funds attracted $26 billion, their fifth consecutive week of inflows, Lipper said.

The Federal Reserve is widely expected to cut interest rates next week to bolster the U.S. economy, even as the U.S. unemployment rate sits at its lowest in 50 years. Broad expectations that the Fed would cut rates to counter the impact of a protracted trade war have helped Wall Street's main indexes scale record levels this month.

"Despite plus-side equity returns, both fund investors and ETF investors were net redeemers of equity assets, redeeming a net $8.4 billion for the week," said Tom Roseen, head of research services at Lipper.

"Shrugging off progress in the U.S.-China trade talks, a nice start to the Q2 earnings season, and general agreement on the U.S. budget and ceiling, investors showed constraint after learning that Iran had seized a British oil tanker in the Strait of Hormuz, increasing geopolitical concerns."

Roseen said investors moved money from equities to bonds. "Both fund and ETF investors padded the coffers of taxable and tax-exempt bond funds, investing net new money in longer-dated issues," he said.

U.S.-based municipal bond funds attracted $1.96 billion of net new cash, the group's largest weekly net inflows on record going back to 1992, Lipper said. U.S.-based investment-grade corporate bond funds attracted about $2.5 billion in the week ended Wednesday, their eighth consecutive week of inflows, according to Lipper data. At the lower-end of the credit-quality spectrum, U.S.-based high-yield junk bond funds attracted more than $1.3 billion in the week ended Wednesday, their seventh straight week of inflows, Lipper said.

For the fifth week running, investors were net purchasers of money market funds, injecting $26 billion into this safe-haven asset class, Roseen added.

(Reporting by Jennifer Ablan; editing by Susan Thomas and Lisa Shumaker)

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