Trade Tensions Driving Investors From U.S. Stocks
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What investor behavior change is introduced at the start of the episode?
I'm J.R.
Whalen in New York. All this talk of a trade war has got some investors spooked to the point where they're pulling money out of U.S. stocks to the tune of $20 billion in June. But where are they putting their money? We'll have details in a moment. First, these money headlines. When it comes to U.S. homeownership, there's good news and bad news. The good news is the homeownership rate continues to climb, with more Americans benefiting from the sharp rise in home values in recent years. The bad news? Homeownership remains historically low. It's risen tepidly this year despite strong economic growth. The share of homes in which at least one occupant is the owner rose to 64.3% in the second quarter. That's up a tenth of a percentage point from the first quarter.
And for now, homeownership among younger Americans is driving the rise in overall homeownership rates. The rate among those under the age of 35 rose to 36.5 percent in the second quarter. That's up 1.2 percentage points from a year earlier. Meanwhile, the Wall Street Journal Daily Shod column reports that rising gas prices are taking their toll on the roads. Vehicle miles driven in the U.S.
Which economic headlines explain the broader market context?
is less than it was a year ago. And that's the first contraction since 2014. And how important is it to you to know how much your coworkers are making? A study released this week by the National Bureau of Economic Research suggests that employees don't work as hard if they think they earn less than their coworkers. In an experiment involving about 2,000 employees at a large bank, the authors of the study found that people who believe their coworkers get paid more than they do are likely to work fewer hours, they send fewer emails, and negatively affect their overall sales performance. But the researchers found that large salaries among upper management actually incentivizes employees to work harder.
as it could create an expectation that they, too, could earn a salary near or close to that of their boss. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. It seems on a daily basis we hear and read about global trade tensions, and it's clear now many investors have had their fill. They're pulling out of U.S. stocks at an alarming pace, and Wall Street Journal Markets reporter Michael Worsthorn is here to discuss. So, Michael, these numbers rank among the largest outflows in the past 10 years. Where's the money going?
Money's going into bonds right now. Investors are fearful of just where equities are going to go with the trade tensions where they are. The outflows that we saw in June, which was about $20 billion from U.S. stocks, weren't as great as what we saw, say, February, March, when the market was gripped with mostly inflation fears and worries of wages growing faster than expected. Still, I think this underscores how investors are feeling about trade and just the significant threat that if this were to evolve in such a way that leads to a trade war either with China or with the European Union, which looks like we're not heading toward at least as of the most recent news. But if those things were to evolve into the most dire circumstances, investors are thinking about that and trying to sort of guard against that risk.
Now, a lot of this does have to do with trade tensions between the U.S. and China and the U.S. and the EU, which with the EU, it could be easing, as you pointed out. But there are some other factors at work as well.
As I mentioned, inflation continues to be a fear for investors. You know, they're not so much concerned with it rising faster than expected, but just that the Federal Reserve is proceeding with its pace of interest rate hikes increasingly. if they were to veer from this well-telegraphed path, that could be a policy misstep. So the market's still very much thinking about that. The other thing on the market's mind, very much so, but you're not seeing a lot of trading action. Just maybe more concern or more likely than investors to sit on the sidelines is the midterm elections coming up.
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