Money surged into stocks over the past week, with investors eager to get back into trades supported by President Donald Trump's economic agenda.
Equity-based funds raked in $24.6 billion during the period ended Thursday, according to Bank of America Merrill Lynch. That was the highest total since Trump's election victory in November when money flowed into the market on hopes that his pro-growth policies would give the market another lift.
Though stocks have been on a solid run for most of the year, some of the so-called Trump trade sectors had been cooling off. Banks in particular surged nearly 30 percent after the election but have traded slightly lower since early March, when investors began to fear that pro-growth policies such as tax reform, regulation rollbacks and infrastructure spending would stall in Congress.
However, those fears seem to be abating, and it's showing up in money flows.
Financials took in $1.4 billion for the week, according to BofAML. Bank stocks collectively are up about 5.4 percent since June 6.
Inflows slowed to the most recent hot trade, technology, with the sector bringing in just $100 million.
Investors, however, continue to hedge their bets on a strong equity market, with bonds again attracting heavy attention. Fixed income funds pulled in another $9 billion, the 13th straight week of inflows in a year that has seen the group draw $192.7 billion.
The big move to bonds comes even though the Fed hiked interest rates again this week. Higher rates cause bond prices to drop, eating into capital growth for investors.
However, it may have been the Fed move, particularly the rate increase amid a fairly hawkish backdrop and confident language about the economy, that pushed the fund flows.
"That basically allowed people to breathe a sigh of relief. You may have seen that in the fund flows this week," said Doug Roberts, head of Channel Capital Research. "It remains to be seen about the growth story, it remains to be seen about Trump."
The money to stocks went into exchange-traded funds, which saw $26.3 billion in inflows, compared with mutual funds, which actually saw $1.7 billion in redemptions. Big winners in the ETF space were the SPDR S&P 500 Trust, with $6.5 billion, and the iShares Core S&P 500, which raked in $2.5 billion, according to FactSet.
The big winner for banks was the Financial Select Sector SPDR fund, which took in nearly $1.3 billion.
Banking analyst Dick Bove continues to warn that investors are making a mistake betting on bank stocks gaining because the Fed is raising interest rates. Bove instead sees the industry suffering because of weak trading and loan volumes as well as a rise in bad loans and revenues overall.
"This is not arcane 'stuff.' It is 'bread and butter' analysis," Bove, vice president of equity research at Rafferty Capital Markets, told clients in a note. "You need to sell more widgets to get more earnings and make your stock move higher. At the moment, banks are not doing this."
Overall, BofAML estimates that equity funds have seen $163.8 billion in net inflows for the year, with ETFs gaining $228.9 billion and mutual funds losing $65.1 billion. Bond funds, meanwhile, have seen $192.7 billion in inflows.
Watch: As investors move back to bank stocks, one analyst thinks housing is the best bet.
