This past week’s Fed message that the economy was still on too soft a footing and wouldn’t respond well to tightening efforts was well received initially, sending the DJIA and S&P 500 to new highs. However, a day after the announcement, the markets began one of their longest sell-offs since December 2012 with the S&P 500 suffering its first five-day decline of this year. (However, the S&P 500 is still up 18.69% year to date through 9/25/13.)
Despite a reduction in recent uncertainties, such as the Fed’s decision not to begin tapering and the President’s commitment to the U.N. regarding Syria, investors began to focus on the possibility of another Washington budget and debt ceiling standoff. Shrugging off better-than-expected August new home sales, investors began their hand wringing over the looming government shutdown.
In spite of all this, mutual fund investors were net purchasers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), injecting a net $34.6 billion for the week ended September 25. Once again, the municipal bond funds macro-group witnessed the only net redemptions for the week, handing back just $0.2 billion, while money market funds witnessed net inflows of $28.0 billion, equity funds took in some $3.5 billion, and taxable bond funds saw net inflows of $3.3 billion.
For the third consecutive week equity exchange-traded funds (ETFs) experienced net inflows, taking in $2.9 billion, while allocating the largest sum of net new money to iShares MSCI Emerging Markets Index ETF. With market uncertainty still ever-present, it wasn’t surprising to see SPDR S&P 500 ETF (-$1.0 billion) handing back the largest net outflows.
Mutual fund (ex-ETF) investors’ interest in equity mutual funds remained intact with net $0.5 billion for the week (for their group’s 38th consecutive week of net inflows). Domestic equity funds suffered net redemptions for the first week in three, handing back some $0.6 billion, while their non-domestic equity fund counterparts took in $1.3 billion. On the domestic side, investors became slightly more risk averse, injecting $196 million net into large-cap funds. With the slight decrease in international tensions, investors turned their attention back to international markets, injecting a net $0.9 billion into international funds.
Trying times for Treasuries
Taxable bond funds (ex-ETFs) took in a scant $2.1 billion net for the week. Despite Treasury yields declining, investors continued to shun government Treasury & mortgage funds, government mortgage funds, and government Treasury funds, redeeming a net $309 million, $317 million, and $238 million, respectively. Despite the decline in yields and plus-side returns, municipal debt funds (ex-ETFs) witnessed their eighteenth consecutive week of net outflows.
For more information on this week’s Lipper fund flows data, please refer to Lipper’s U.S. Fund Flows website or this video.
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