With President Donald Trump’s tax proposals kicking the U.S. reflation story back in gear, flows into Industrial and Financial Sector Funds climbed to seven and 10-week highs in late April while Gold Funds posted their biggest outflow YTD.
The tax plan’s emphasis on cuts, rather than reform and revenue neutrality, made it easy for investors to translate its impact into higher borrowing costs. That capped the recent run of inflows recorded by Utilities Sector Funds and weighed on Real Estate Sector Funds, which are also under pressure from speculation the U.S. Federal Reserve hopes to start trimming its mortgage-backed bond holdings later this year.
The U.S. real estate market is not the only one being viewed askance by investors and fund managers. Despite the latest spike in prices fund both are keeping their distance from real estate in China, fearing fresh regulatory measures by the government to stabilize key urban markets, with EPFR Global-tracked Equity Funds steadily cutting their exposure for the third straight year.
Hopes that OPEC will be able to extend the production capping agreement that expires in May, thereby keeping a floor under oil prices, helped Energy Sector Funds snap a three-week run of outflows.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.