Because of “Trade deal stress,” global investors pulled around $20.5 billion from the market in the recent week. This move is an indication of the trade tensions present between China and the United States in the financial market.
Merrill Lynch, an analyst from the Bank of America, stated that the withdrawal of cash from the global equities last Wednesday is the third biggest market pull out recorded this year. This has been the case ever since American President Donald Trump stirred a dispute on the trades of the two economically powerful countries by threatening to increase the taxes on imported Chinese goods.
United States equity funds observed an outflow amounting to $14 billion. This was the most massive cash outflow from January 30, as reported by BAML and seen in the data released by the EPFR, a flow tracking specialist. EPFR considered the individual and institutional influx of investors and how these accounts affected the global market. Funds from European accounts also observed an outflow of $2.5 billion in the previous week and $1.3 billion withdrawal from starting market equities. According to BAML, these are also indications of the “trade deal trauma.”
All in all, these fund outflows have already amounted to $116 billion in this year alone. This record might beat the record in 2016, which is currently considered the worst in the past couple of years.
On the other hand, bonds experienced an increase amounting to $7.3 billion this week, marking the 18th week of continuous inflows in what is considered to be the “haven in times of market distress.” Analysts from BAML identified the causes of the massive inflows to be emerging-market debt, mortgage-backed securities, and high-yield bonds.
After Trump’s warning last Sunday, the American market raised the tariffs on Chinese goods from 10% to 25% on Friday. China responded by expressing their deep regrets and declaring that they will take countermeasures.