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The equity markets posted gains for the flows week ended July 2, 2014, during a period that began with the S&P 500 posting modest losses as investors continued to look for confirmation of economic growth amid mixed signals. Personal spending for May rose less than anticipated, giving investors pause on the previous Thursday; however, the Thomson Reuters/University of Michigan consumer sentiment index for June was stronger than anticipated on Friday, helping bolster the market. Following a quiet day on Monday, June 30–the close of the second quarter–Tuesday witnessed the S&P 500 climb to a new record high as the market resumed its recent trend of grinding higher, aided by positive China manufacturing data. This was followed by the market’s inching up to reach its twenty-fourth record high of 2014 on Wednesday. A private-sector labor report came in stronger than anticipated, helping reassure some investors that the underlying economic fundamentals are improving, albeit slowly. The S&P 500 rose 0.82% for the week while putting its year-to-date gain at 7.95%. The NASDAQ climbed 1.78% for the week, putting its 2014 return so far at 6.73%.
Investors were net buyers (+$3.1 billion) of equity fund assets (including conventional funds and exchange-traded funds [ETFs]). Taxable bond funds (including ETFs) saw net inflows of $1.0 billion. Money market funds witnessed net inflows of $5.4 billion for the week, and municipal bond funds gained $19 million net.
REUTERS/Jo Yong-Hak
Equity funds (ex-ETFs) had net outflows for the first time in 27 weeks, with $1.7 billion going out. Equity ETFs witnessed net inflows (+$4.8 billion) for a sixth consecutive week. Nondomestic equity mutual funds (excluding ETFs) had positive net flows (+$1.0 billion), while nondomestic equity ETFs also had net inflows (+$595 million), following the previous week’s net outflows of $2.0 billion. Domestic equity funds (ex-ETFs) had negative flows (-$2.7 billion) for the third week in a row, while domestic equity ETFs saw net inflows (+$4.2 billion) for a sixth consecutive week.
Lipper’s Large-Cap Core Funds classification (excluding ETFs) had its largest weekly net outflows (-$1.4 billion) since the week ended July 25, 2012. The Mid-Cap Core Funds classification also experienced outflows (-$266 million) for a fifteenth week in a row.
The Small-Cap Core Fund segment (excluding ETFs) also witnessed net outflows (-$319 million), following the previous week’s positive flows of $16 million. Emerging markets funds experienced positive net flows (+$268 million), reversing the previous week’s modest net outflows (-$4 million). The Real Estate Funds classification (excluding ETFs) experienced its fourteenth consecutive week of net inflows (+$45 million) as this asset class remains attractive to income-seeking investors. Reflecting the net inflows into equity ETFs during the week, SPDR S&P 500 ETF (SPY) had net positive flows of $1.0 billion. IShares MSCI Emerging Markets (EEM) had net inflows of $413 million.
The municipal bond funds macro-group (including ETFs) witnessed net inflows (+$19 million) for a ninth consecutive week. The net flows were down from the previous week’s inflows of $233 million.
Taxable bond funds (including ETFs) had $1.0 billion of net inflows for the week, with the Barclay’s U.S. Aggregate Bond Index declining 0.28%. (The index has now risen 3.40% so far for 2014.) Bond price losses coincided with the positive performance of equities during the latter part of the week.
The bond market experienced some strength at the beginning of the period as the latest consumer and inflation data cast doubt on the direction of the economy, as did the first quarter GDP report. However, bond prices fell later in the week on positive global manufacturing data and general caution ahead of the Labor Department’s employment report that was to be released on Thursday, particularly following the release of solid private-sector job numbers on Wednesday. The benchmark ten-year Treasury yield began the week at 2.57% and ended at 2.64%.
Taxable bond fund investors were net buyers of fixed income assets as some investors continued to favor higher-yielding segments. But, loan participation funds (including ETFs) witnessed their eighth consecutive week of net outflows (-$457 million)—the longest streak of consecutive weekly net outflows for loan participation funds since October 19, 2011. High-yield funds saw positive net flows (+$90 million) for the second consecutive week as investors appeared to continue their search for yield. Emerging-markets hard currency funds also saw net inflows (+$34 million) for an eighth week in a row. Core bond funds had their seventh week of positive net flows, with $377 million entering the segment for the week.
For more information on this week’s Lipper fund flows data, please refer to Lipper’s U.S. Fund Flows website.