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Investors are taking out cash to pay tax bills and selling U.S. stocks

LONDON (Reuters) – Cash equivalent funds saw tax-related outflows of $160 billion in the week to Wednesday, according to Bank of America’s weekly report citing data provider EPFR’s fund flows and asset allocation, while U.S. stocks in suffered in the second week of the crisis. outflow.

The $4.1 billion withdrawn from U.S. equities last week saw U.S. stocks see their largest two-week outflows since December 2022.

Tuesday was the deadline for the U.S. Treasury Department’s annual tax return.

Investors remain concerned about high valuations as markets shift expectations for Federal Reserve rate cuts to later in the year.

MSCI’s broadest gauge of world shares fell almost 4% in the past two weeks, on track for the biggest two-week drop since October.

BofA strategist Michael Hartnett said the correction in risky assets has taken place in the second quarter as markets shift to viewing the continued robust US data as negative.

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“’Good news = good’ in the first quarter is turning into ‘good news = bad,’” Hartnett said.

“Bears say US growth stocks and high yield (HY) bonds signal a sinister transition to ‘bad news = bad’.”

In the first quarter, investors saw good economic data as positive for corporate profits, and while these reduced expectations of Federal Reserve rate cuts, some monetary easing was still seen as almost certain.

But as economic data remains resilient, rate cuts are being postponed further and some policymakers have even said that a further rate hike is not impossible.

BofA said the Bull and Bear indicator, a measure of market sentiment, fell from 5.2 to 5.0 as outflows from equities and high-yield bonds outpaced the decline in cash levels from their fund manager survey.

(Reporting by Samuel Indyk, Editing by Alun John, Elaine Hardcastle)

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