by Pat Keon, CFA.
Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) took in over $11.5 billion of net new money for the fund-flows week ended Wednesday, February 8. All the fund macro-groups had net inflows for the week, for a third straight week of positive flows for U.S. funds. Taxable bond funds (+$7.5 billion) accounted for the majority of the net new money, followed by equity funds (+$2.4 billion), money market funds (+$1.3 billion), and municipal bond funds (+$304 million).
The broad-based equity indices recorded positive returns on a stronger-than-anticipated January jobs report and the first step of President Donald Trump’s deregulation plan. The Dow Jones Industrial Average and the S&P 500 Index posted gains of 0.82% and 0.66%, respectively, for the fund-flows week. A key element driving these gains was the 227,000 jobs the U.S. economy added last month. This was the most new jobs added in four months, easily surpassing the forecasted 197,000 new jobs. The other factor behind the week’s gains was Trump’s signing an executive order directing review of the Dodd-Frank legislation, which was implemented in the aftermath of the 2008 global financial crisis. The financial sector was up over 2% for the week on this news, the biggest increase for any of the S&P 500’s sectors.
The net inflows for taxable bond funds were relatively evenly split between mutual funds (+$4.5 billion) and ETFs (+$3.0 billion). It was the sixth straight weekly net inflows for taxable bond mutual funds and the third straight for ETFs. For mutual funds the loan participation peer group once again led the way with net inflows of almost $750 million. This group has taken in almost $9.3 billion of net new money since the election, benefitting from Trump’s campaign promise of financial deregulation as well as the current environment of rising interest rates. For ETFs Lipper’s Corporate Debt Funds–BBB Rated (+$1.3 billion) and High Yield Funds (+$304 million) classifications took in the most net new money.
Equity mutual funds broke the longest streak of net outflows in their history (47 weeks) during which time their coffers shrank over $220 billion; they took in just over $550 million of net new money this past week. Nondomestic equity funds (+$582 million) were responsible for all of this increase, while domestic equity funds saw $27 million net leave. Equity ETFs had positive flows of almost $1.9 billion for the week as investors poured money into SPDR Dow Jones Industrial Average (DJI, +$1.1 billion) and SPDR Select Sector Healthcare (XLV, +$1.1 billion). Meanwhile, SPDR S&P 500 ETF (SPY) had net outflows of $3.1 billion.
Muni bond mutual funds (+$366 million) posted their fifth consecutive week of positive net flows. The national muni peer group (+$335 million) was responsible for almost all of this increase, with the High Yield Muni Debt Funds category contributing the lion’s share—a net $280 million.
Money market funds recorded net inflows of $1.3 billion as U.S. Government Money Market Funds (+$3.5 billion) and Institutional Money Market Funds (+$2.5 billion) took in the most net new money, while Institutional U.S. Government Money Market Funds (-$3.2 billion) and Institutional U.S. Treasury Money Market Funds (-$2.7 billion) saw the most money leave.
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