Stock funds post $17.2 billion in outflows, biggest of 2015

By Sam Forgione

NEW YORK (Reuters) – Investors worldwide pulled $17.2 billion out of stock funds in the week ended May 6, marking the biggest outflows of the year on concerns about the U.S. economy and U.S. share prices, data from a Bank of America Merrill Lynch Global Research report showed on Friday.

Investors also demonstrated their aversion to riskier assets by pulling $2.6 billion out of high-yield bond funds, also marking the biggest outflows of the year according to the report, which also cited data from fund-tracker EPFR Global. Bond funds overall attracted a modest $400 million to mark their 18th straight week of inflows.

Funds that specialize in U.S. shares accounted for most of the outflows from stock funds with $15.8 billion in withdrawals, the most since August 2014 according to the report. Investors pulled $1.5 billion out of funds that specialize in European shares, marking their first outflows in 17 weeks.

The hefty outflows from stock funds and high-yield bond funds came as the benchmark S&P 500 stock index fell 1.3 percent over the weekly period on some weak U.S. corporate earnings reports and data showing the U.S. trade deficit in March swelled to the highest level in more than six years.

The FTSEurofirst 300 index of top European shares also posted losses over the period and tumbled 2.2 percent.

Federal Reserve Chair Janet Yellen said high equity valuations could pose potential dangers, which added to pressure on U.S. equities.”If I’m the average investor and I don’t know any better, I’m going to think that stocks are actually overvalued” given Yellen’s comments, said Phil Orlando, chief equity market strategist at Federated in New York.

He said, however, that he saw the S&P 500 gaining 12 percent, including dividends, from current levels through the end of the year on a pickup in U.S. economic growth as transitory effects from factors including harsh winter weather wear off, which will in turn help U.S. corporate earnings improve.

Investors also shunned funds that mainly hold safe-haven U.S. Treasuries, pulling $1.5 billion from the funds to mark the biggest withdrawals in nine weeks. The Barclays U.S. Treasury Index fell 1 percent over the weekly period as a global slide in government bond markets hurt U.S. Treasuries prices.

Investors stored some cash on the sidelines in low-risk money market funds, which attracted $5.2 billion in inflows.

(Editing by Matthew Lewis)

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