With investors adjusting their expectations for the U.S. reflation story promised by President Donald Trump, and looking ahead to the first quarter earnings season, flows into EPFR Global-tracked Sector Fund groups were generally subdued during the second week of April. Healthcare Sector Funds recorded the biggest inflow, taking in a net $286 million, while Energy Sector Funds experienced the heaviest redemptions.
Also taking in fresh money were Commodities, Industrials, Utilities, Consumer Goods, Financials and Technology Sector Funds. Three of those are dedicated to sectors – Technology, Financials and Commodities – expected to deliver the strongest 1Q17 earnings growth among U.S.-based companies.
Although energy sector plays are also expected to post good earnings numbers, especially on a comparative basis year-on-year, Energy Sector Funds recorded consecutive weekly outflows for the first time since early December. Investors are uncertain how much higher oil prices will go, given the ability of U.S. shale oil producers to ramp up production and OPEC’s historic difficulty maintaining production curbs.
Flows into Sector Fund groups viewed as "bond proxies" – Consumer Goods, Telecoms and Utilities Sector Funds – climbed for the second straight week.