U.S. fund investors creep back in to market: Lipper

By Trevor Hunnicutt

NEW YORK (Reuters) – U.S. fund investors inched back in to the markets during the most recent week, putting $2.5 billion into bonds and $1.1 billion into stocks, Lipper data showed on Thursday.

Yet wounded investors were reluctant to wade back in to their home market, with domestic equity funds recording a third straight week of withdrawals, despite a rebound from a quick selloff at the beginning of the month.

Nearly $4.6 billion cascaded out of those products in the seven days through Feb. 21, Lipper said. Cash-like money market funds gathered $12.3 billion during the week.

“The markets are still a little jittery about interest rates,” said Pat Keon, senior research analyst for Thomson Reuters’ Lipper unit. “They’re worried that the Fed might get more aggressive.”

On Wednesday, minutes of the Jan. 30-31 meeting cemented expectations that the Fed will hike rates under its new chief Jerome Powell next month, and that rates will be hiked on at least another two occasions in 2018.

The yield on the benchmark 10-year Treasury note leapt from around 2 percent in September to just shy of 3 percent this month as economic growth and low unemployment gave rise to concerns the U.S. Federal Reserve may have to raise rates quickly to head off inflationary pressures.

The fell more than 10 percent in a few weeks around the beginning of this month before rebounding a bit in recent days.

U.S. fund investors withdrew the most cash on record from equity funds two weeks ago, but are cherry-picking opportunities to get back in. Nondomestic stock funds took in $5.7 billion this week, according to Lipper, offsetting the domestic stock outflows.

Emerging markets’ stocks, a big winner despite the U.S. selloff, pulled in nearly $2 billion, a ninth straight week of inflows for funds focused on those markets, the research service said.

Last week, risk-off sentiment spread to bonds, with high-yield “junk” bond funds posting their second-biggest cash withdrawals on record, $6.3 billion. The result improved this week, with outflows totaling just $335 million, Lipper said.

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