$13.6 BILLION IN FUND OUTFLOWS AMIDST VOLATILE MARKET WEEK

The Dow Jones Industrial Average experienced volatile trading for the fund-flows week ended Wednesday, May 21^st with the Dow witnessing three triple-digit moves during the five trading sessions and closing out the week down 0.5% (-80.91 points) at 16,533.06.  

New housing starts soared 13.2% for April to an annual rate of 1.1 million units. The lion’s share of this increase came from multi-family (apartment) starts. (Multi-family starts now account for 39.5% of total new housing starts, marking the highest level since 1985.) The Federal Open Market Committee minutes also made an impact during the week. The Street was looking for signs as to when the easy-money spigot would be turned off. The minutes did indicate the Fed believes the time for higher interest rates is drawing closer, but the market interpreted the Fed’s lack of a definitive timetable for action as a positive sign, and the Dow rebounded 1.0% (+158.75 points) on the day the minutes were released.

Although the week’s trading activity resulted in $13.6 billion of net outflows for funds, taxable bond funds (+$3.4 billion net) had their eleventh straight week of positive flows. Taxable bond mutual funds contributed $1.8 billion to this increase, while taxable bond exchange-traded funds (ETFs) were responsible for $1.6 billion. Mutual funds in Lipper’s Short/Intermediate Investment-Grade Debt Funds category were responsible for almost $700 million of positive net flows for the week, while ETF investors were buying ProShares Ultra 7-10 Year Treasury (UST, +$988 million).

Equity funds had net outflows of $7.6 billion for the week. Equity ETFs accounted for all of these net outflows and had $9.6 billion leave their coffers. ETF investors sold SPDR S&P 500 ETF Trust (SPY, -$4.2 billion) and iShares Russell 2000 ETF (IWM, -$3.6 billion). Equity mutual funds had positive flows of just over $2.0 billion, marking their twenty-first straight week of net inflows. The bulk of these flows (+$1.58 billion) came from international equity mutual funds.

Municipal bond funds had their third consecutive week of net inflows (+$664 million). Municipal bond mutual funds (+$535 million) accounted for the lion’s share of these positive net flows. Money market funds had net outflows of $10.1 billion; marking the second consecutive week that money left their coffers.

For more information on this week’s Lipper fund flows data, please refer to Lipper’s U.S. Fund Flows website or this video.