Funds are pouring into the U.S. stock market at the fastest rate since 2015, although valuations are close to historical highs and investors are worried that rising inflation may prompt the Fed to tighten monetary policy.
Cameron Brandt, head of research at EPFR, the company that compiled the data, said that since February, US equity funds have received a net inflow of $189 billion, which is a “significant boost”.
Strong growth expectations, lower interest rates, increased consumer spending, and increased US vaccination rates have reawakened investors’ confidence in the US economy, which supported traffic growth in the first half of 2021.
Goldman Sachs predicts that by the end of this year, households and businesses will buy US$500 billion in US stocks.
A large part of the funds flowed into cyclical stocks such as finance, industry and energy, which are believed to benefit from higher economic growth. According to a monthly study by the Wells Fargo Investment Research Institute, the US Small Cap Value Fund has accumulated $11 billion in capital inflows in the first five months of 2021, more than any year in the past decade.
Wells Fargo analyst Ken Johnson said that investors are expected to continue investing in U.S. equity funds in the short term, but “we expect that as investors price the possibility of the Fed’s rate cuts and hikes, we expect this process to be There are fluctuations.”
As the U.S. economy continues to reopen and more people apply for jobs, the next U.S. employment report is expected to be stronger on Friday, adding to speculation that inflation will rise further.
“We are still in the camp where we want to prepare for the economic recovery-commodities and financial stocks, and insist on this procyclical value… But there is a balance between health and consumer staples,” fund manager Eaton Vance (Eaton Vance) Chief Investment Officer of Stock Eddie Perkin said.
However, due to higher valuations, some institutional investors are seeking to reduce their equity exposure to reduce risk.
“There have been some rotations of growth stocks. Traditionally, these stocks have higher value multiples and lower value… I think there may be more such things happening, but from our perspective, it will be very common ,” said Amy Falls, chief investment officer of Northwestern University Endowment Fund. “It’s just to reduce stock risk, not some industries.”