Investors are abandoning stocks for debt markets

New York Stock Exchange. Photo: Michael Nagle / Xinhua via Getty

Global investors put more money in debt funds rather than equity funds in October amid heightened fears ahead of the US presidential election, data from fund database Refinitiv shows. Lipper.

The study showed that global debt funds received an inflow of $ 49 billion (£ 37.6 billion) in October, compared with an outflow of $ 2.6 billion for equity funds.

Since voting closed on Wednesday, the global stock market has rallied as Democratic presidential candidate Joe Biden appears to move closer to the presidency.

While Biden could be on the verge of victory, incumbent President Donald Trump has launched a series of swing state lawsuits.

“For the economy, a status quo outcome or a Democratic victory with a divided Congress has very similar growth trajectories in our scenario analysis, but is slightly lower than our benchmark and about 100 basis points below. a Democratic sweeping result, ”UBS said in a note Thursday. .

Gains early in Thursday’s session in Europe remained modestly positive as a Biden win seemed likely. The FTSE (^ FTSE) in London was 0.5% higher, the German Dax (^ GDAXI) is up 0.8%, while the French CAC 40 (^ FCHI) increased by 1%.

READ MORE: US election: European stocks hit two-week high as Biden moves closer to victory, Trump files lawsuits

“Last week’s sell-off looks more and more like pre-election nervousness, a bout of nervousness that has reversed even faster than it appears,” said Chris Beauchamp, market analyst in chief at IG.

As the election results become clearer, the earlier movement from stocks to debt funds may already be shifting, with some clear winners on Wednesday from a potential presidential victory by Biden.

“The big winners were the tech giants and the healthcare industry, which may well end up with their dream scenario of a Biden White House and Republican-controlled Senate,” said Adam Vettese, analyst market at eToro.

However, market confidence could erode further.

“Without both chambers, Biden’s ability to push through tax hikes and increase regulation will be limited, while tech companies envision a more fluid relationship with China (which is crucial for both chains supply and as a market for technology products), ”said Vettese. “If Democrats fail to secure a majority in the Senate, Biden will be limited in his ability to reform health care and increase regulation there.”

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