The equity markets posted solid gains for the week ended April 2, 2014, during a week that began with modest losses that were followed by the S&P 500’s steady climb and close at a record high. The S&P 500 rose 2.12% for the week, while leaving its year-to-date gain at 2.84%. The NASDAQ Composite declined 2.46%, putting its return at 2.39% for 2014.
Watch the correspondent video to this report here.
The period began on a weak note with investors awaiting economic data points to better gauge the level of economic growth. Consumer spending and personal income reports were positive, which aided the market on Friday, March 28. Additional reports on the labor market were accompanied by a better-than-expected report on factory orders, helping to bolster the case for both continued modest economic growth and corporate profitability, while pushing the S&P 500 to a new record high. The market was also aided by comments from Fed Chair Yellen in which she indicated there was still substantial slack in the economy. This was viewed as a positive for equities, since it would allow inflation to remain low and potentially keep interest rates low for a longer period.
Within this environment, mutual fund investors were net buyers of equity (+$5.4 billion) and taxable fixed income (+$3.7 billion) fund assets (including conventional funds and exchange-traded funds [ETFs]). Money market funds witnessed net outflows of $15.7 billion for the week, while municipal bond funds (-$81 million net) saw modest negative flows.
Equity funds (ex-ETFs) for the fifteenth week in a row had positive net flows, with $2.2 billion going in. Equity ETFs also witnessed net inflows (+$3.2 billion) following the previous week’s net outflows (-$2.1 billion). Nondomestic equity mutual funds (excluding ETFs) had positive net flows of $1.6 billion, while nondomestic equity ETFs had net inflows of $2.5 billion, following two previous weeks of net outflows. Domestic equity funds (ex-ETFs) had positive flows (+$0.7 billion) for the eighth week in a row, while domestic equity ETFs also saw net inflows (+$0.7 billion), following the previous week’s net outflows.
Lipper’s Large-Cap Core Funds classification (excluding ETFs) (+$957 million) had net inflows for the first time in seven weeks, while Large-Cap Growth Funds witnessed net outflows of $429 million. Alternative long/short funds (excluding ETFs) continued to see net inflows (+$322 million). The equity income group (excluding ETFs) witnessed net outflows (-$195 million) for a ninth consecutive week. Reflecting the positive net flows into equity ETFs, iShares Core S&P 500 ETF (IVV) had net inflows of $941 million, while IShares Core: MSCI EAFE (IEFA) had net inflows of $153 million.
The municipal bond funds macro-group witnessed modest net outflows
(-$81 million) for a second consecutive week. This was during a week in which higher-risk assets were generally more favored by investors.
Taxable bond funds (including ETFs) had $3.7 billion of net inflows for the week, with the Barclay’s U.S. Aggregate Bond Index declining 0.37%. Modest bond price increases coincided with the negative performance of equities early in the period; however, bond prices declined later in the week as equities rebounded and prospects for reduced monetary stimulus by the Fed increased amid some signs of a gradually improving economic outlook. The benchmark ten-year Treasury yield began the week at 2.71% and closed at 2.82%.
Taxable bond fund investors were net buyers of fixed income assets; some appeared cautious ahead of the April 4th jobs report. Core plus bond funds (excluding ETFs) had their fifteenth week of positive net flows, with $247 million entering the segment. High-yield bond funds also had a week of net inflows, with $153 million entering the group during a period in which investors appeared to favor higher-risk assets. U.S. mortgage funds (excluding ETFs) had a week of net outflows (-$185 million).
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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