Strategists from Bank of America reported a significant surge in U.S. stock fund inflows amounting to $20 billion. This occurred on the very day former President Trump claimed victory in the presidential election. According to Michael Hartnett, a strategist at Bank of America citing data from EPFR Global, this marks the largest single-day increase in five months.
This influx was particularly notable among small-cap stocks, perceived as beneficiaries of Trump's protectionist policies, receiving $3.8 billion in investments, the highest since March. Following the election results and another rate cut by the Federal Reserve, U.S. markets reached record highs, with the S&P 500 poised for its largest weekly gain in a year.
While Trump's proposal to lower corporate tax rates is expected to boost corporate earnings, there are investor concerns about potential trade and immigration policies that may reignite inflation. Initially, the yield on 10-year U.S. Treasury bonds spiked post-election but has since surrendered most of those gains. Hartnett summarized the situation with "inflation boom = sell bonds," foreseeing large-scale policies such as an $8 trillion tax cut, $3 trillion in trade tax revenue, and $1 trillion in spending cuts.
The Republican victory in securing Senate control additionally impacts the political landscape, while approximately 30 congressional races were still pending resolution due to uncounted votes. For the week ending November 6, U.S. stock funds saw a total increase of $32.8 billion, contrasting with European stock funds, which faced a sixth consecutive week of outflows totaling $900 million, pressured by concerns over potential trade impacts.
