A man points a computer screen showing stock information in this illustration photo taken in Bordeaux, France, March 30, 2016. REUTERS/Regis Duvignau
Investors pumped money into inflation protection and dumped some tech stocks, BofA’s weekly fund flow data showed on Friday, as U.S. Federal Reserve policymakers hinted at discussing tapering of government bond purchases “at some point”.
In the week to May 19, $1.1 billion left technology funds, the largest outflow since December 2018. Gold funds attracted $1.3 billion, BofA said.
Tech stocks are particularly sensitive to rising interest rate expectations because their value rests heavily on future earnings, which are discounted more deeply when rates go up. Investors cut overweight positions on technology stocks to a three-year low, BofA’s May fund manager survey showed.
Treasury Inflation-Protected Securities (TIPS) funds saw the largest inflow in 24 weeks, taking in $2 billion. That came on top of $1.9 billion inflows in the previous week.
Unprecedented stimulus measures to tackle the pandemic-induced recession have now sparked worries about inflation, which featured in the BofA survey as the biggest tail risk for markets.
Last week, data showed U.S. consumer prices unexpectedly rose by the most in nearly 12 years in April, triggering worries that the Federal Reserve may have to raise rates sooner than it currently expects.
U.S. Treasuries meanwhile saw their largest inflows in six months, with $2.8 billion flowing into the safe-haven, the BofA report showed.
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