Many British investors could be nursing outsized losses after piling into US equity funds last month ahead of markets’ recent tariff induced slump.
The S&P 500 was down roughly 10 per cent since the start of April before recovering some ground on Tuesday, as bombshell US trade tariffs have wrecked havoc on financial markets.
Fresh data from Calaston shows North American equity funds saw inflows of £1.8billion from UK investors during March, the third highest month for inflows in the past 10 years, as investors piled in on US stocks.
British investors bought into American stocks in an attempt to ‘buy the dip’ following a poor start to the year across the pond, with the majority heading into exclusively US-focused funds.
As much as 80 per cent of the inflows headed into index trackers, while global funds were the second most popular, with £580million of inflows.
Net inflows towards equities amounted to £1.38billion during the month.
The S&P 500 and Nasdaq composite are both down more than six per cent over the past five days as a result of Trump’s ‘liberation day’ tariff announcements.
Trump’s ‘Liberation Day’ tariff announcements saw trillions of dollars wiped from global markets
These US indices had fallen even further, with the S&P 500 down more than 11 per cent, before posting gains on Tuesday as markets started to recover.
Global markets saw heavy selloffs from Friday, with trillions of dollars slashed off global markets, after Trump announced a raft of additional trade tariffs, including 34 per cent on China, 20 per cent on the EU and 10 per cent on UK imports.
Trumps tariff announcement coincided with the end of the UK’s tax year, meaning many retail investors will have been looking to make the most of their annual tax-free Isa allowances ahead of the cut-off.
Edward Glyn, head of global markets at Calastone said: ‘Seasonal patterns help explain some of the uptick in equity fund buying in March as investors typically look to use up Isa allowances at this time of year. In each of the last four years, March has been one of the four best months for inflows – but Isa appetite alone rarely trumps sagging markets.’
However, Calastone data indicates that both inflows and outflows were up over the past month, 47 per cent higher than average, as investors disagreed over the outlook for US funds.
Glyn said: ‘The strong appetite for US equities in March is at odds with tidal forces in global markets that are seeing a strong rotation out of US assets and into markets like Europe and the UK.’
European markets saw their biggest inflows since July last year, with investors adding £217million to funds in March, even as UK funds saw outflows.
‘It may well be that some investors judge the recent falls to be a dip worth buying. Certainly record volumes of US fund trades in the context of the US-market weakness suggest there is a significant amount of disagreement among investors. The numbers trading out and those trading in are much larger than usual,’ Glyn said.
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