The end of March saw an exit of about $40 billion from US equity market funds in a move that the Institute of International Finance called “remarkable.”
According to a survey conducted by the organization that works with banks and financial institutions around the world, several factors caused the exodus of money, including: trade uncertainty, higher deficit spending by the US government, higher interest rates instituted by the US Federal Reserve, and perhaps others that made the market look less attractive than it did before.
“Regardless of the trigger — trade tensions, the prospect of a higher U.S. fiscal deficit, Fed tightening — heightened market volatility and swings in risk appetite have had a big impact on fund flows in recent weeks,” the IIF stated.
There was a parallel lowering of fund outflows from emerging markets as well, hinting that investor panic is limited to the US assets.
Compared to $11 billion in investments flowing into EM equities in February and $28 billion in January, March saw only $7 billion worth of investments entering the EM market in March.
“The main driver of recent big swings has been the surge and abrupt reversal in flows to U.S. equity funds,” IIF said in its statement. “Since mid- March, U.S. equity funds have seen a remarkable $40 billion in outflows—entirely wiping out the strong inflows of $25 billion seen in the first half of the month.”