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US equity flows reverse as Trump rally falters

Equity funds saw $1bn (€925m) in net outflows during the week to 22 March, after having seen net inflows of almost $20bn over the previous four weeks.

“It was a rough week for the [US] equity markets as investors grew impatient for the Donald Trump campaign-promised tax cuts and became fearful that the administration was about to get bogged down in the quagmire of healthcare legislation,” commented Patrick Keon, a research analyst at Lipper.

Over the week, the S&P 500 Index and the Dow Jones Industrial Average indeed lost 1.54% and 1.38% respectively, with both indexes recording their biggest one-day loss since October on Tuesday.

Even with the week’s losses, the S&P 500 is still up 12% since November last year. But these gains could well reverse further, Keon warns: “There is some thought on the street that if healthcare doesn’t get taken care of now, it will push out the delivery of the all-important tax cuts and put the brakes on the Trump rally,” he said.

In a video interview published earlier today by Expert Investor, Leif Hasager, CIO of the Danish wealth manager Formuepleje, warned an equity market correction is likely to occur once investors start to discount the likelihood that Donald Trump’s promises of fantastic tax cuts, deregulation and fiscal spending are indeed a fallacy. “If investors get disappointed that not more is happening in the US, we could easily see a correction of more than 10%,” he said.

 

Part of the Bonhill Group.