U.S. Equities Benefited From $70 Billion In Inflows, But Now This Is A Problem

The "Trump rally" has gained momentum in part due to the whopping $70 billion in capital inflow to the equity market since the U.S. presidential election.

However, this is now a source of concern among some Wall Street analysts, according to a Bloomberg report. Simply put, the outsized inflow will likely result in many investors pocketing their profit and moving on to other asset classes that haven't benefited as much since the U.S. election.

For example, analysts at Bank of America noted that aside from U.S. stocks, financials, bank loans, U.S. value stocks and high yield assets have all seen positive inflows since the election. On the other hand, emerging markets, U.S. growth stocks, Treasures, gold and investment grade assets will not only experience less vulnerability to profit-taking, but may attract inflows from investors exiting U.S. equities.

Analysts at Morgan Stanley also highlighted the fact that there are few "incrementally positive and exciting outcomes" to boost equities higher in the coming week. The research team argued that the positive impacts from President-elect Donald Trump's plan is already factored into the stock market at its current valuation.

Similarly, analysts at Goldman Sachs are recommending investors be overweight the S&P 500 index in the first three months of the year and then underweight the American index. The analysts they "eventually expect fear to counteract growth optimism and higher rates to set in."

Image Credit: By Michael Vadon (Own work) [CC BY-SA 4.0], via Wikimedia Commons