Investors in Britain are anticipating a possible cut in interest rates, and have poured money into equity funds faster than ever before.
Calastone’s latest data on funds flows shows that over £11 billion has been invested in equity funds so far this year. This is up from just £700 million for the same period last. It was the best half year period since Calastone began compiling data ten years ago.
The markets expect that the Bank of England will reduce interest rates for the first time since more than four year in August, while the US Federal Reserve is expected to do the same in September. The Office for National Statistics revealed last month that the Bank had achieved its inflation target for the very first time since July 20,21. The Bank of England voted at its June meeting to keep rates unchanged for the seventh time in a row.
Edward Glyn of Calastone’s global markets said that the hopes of cheaper money was the main driver of record equity flows. “All eyes are on the world’s Central Banks, looking for signs that long-awaited rates cuts from the Fed, the Bank of England, and the Swiss National Bank will follow those who have already started to bring down the price of money,” he said.
Stock markets tend to benefit from a fall in interest rates, as the potential returns are more attractive than those offered by lower-risk government securities.
Calastone has had five of its fifteen best-ever months in this year, with UK investors adding £1.72 billion.
Since the beginning of the year, North American and Global equity funds were the most popular, with a combined £15.4billion in inflows. This was partly offset by £3.8billion being withdrawn from UK focused funds, who have continued to be shunned.
In June, however, investors withdrew £600m from funds dominated by large technology stocks like Microsoft and Nvidia. The chipmaker briefly became the most valuable company in the world last month.
Funds that focus on environmental, social, and governance themes have also fallen out of favor and experienced net outflows, for the first since December. £179 million was taken from these funds.
Post Disclaimer