Several economic factors lined up in the week ended May 8 — and mutual fund investors responded.
Reinforced commitment from the Fed and better-than-expected nonfarm payroll numbers helped power U.S. equity markets as domestic stock indices hit new highs. Investors took notice — and considered riskier assets as yield from bonds fed continued to be less attractive. While many analysts advised caution, the market sang its siren song and investors injected roughly $16.6 billion net into mutual funds and exchange-traded funds (ETFs) (excluding money market funds) for the week ended May 8.
Equity funds posted their strongest week in the last eight, adding $7.7 billion of net new money. Following the pattern of the previous week, interest in equity ETFs (with net inflows of $5.9 billion) heavily outpaced that for their mutual fund brethren; SPRD S&P 500 ETF (SPY) gathered up the majority of the positive net flows at $5.4 billion.
Interest in the conventional funds business was not lost; equity mutual funds (+$1.8 billion net) posted their 18th consecutive week of net inflows, bringing year-to-date total to $100.4 billion. Investors continued to show preference for nondomestic equity mutual funds (+$1.1 billion net); emerging market products attracted roughly $527 million for the week.
On the other side of the aisle, taxable bond funds (+8.8 billion net) posted their largest weekly inflow on record. While interest in bond mutual funds (+$4.4 billion net) was within the range of what we have seen so far this year, a record inflow for taxable bond ETFs (+$4.5 billion) helped push the broader asset group to the new record.
Investors also liked bank loan products as the group posted net inflows of $1.0 billion. What proved different this past week was the increased interest in U.S. Treasury-based ETFs; iShares Barclays 3-7 Year Treasury Bond ETF (IEI) and ProShares Ultra 7-10 Year Treasury ETF (UST), with net inflows of $1.5 billion and $1.1 billion, respectively, led all other taxable bond funds.
Municipal bond funds were barely able to break a nine-week losing street with net inflows of just $22 million. Money market funds benefited from the across-the-board spending, adding $16.5 billion net.
For more information on this week’s fund flows data, please refer to Lipper’s website or this video.
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