by Pat Keon, CFA.
The Dow Jones Industrial Average closed the fund-flows week ended Wednesday, August 13, at 16,651.80 for a gain of 1.3% (208.46 points) for the week. This performance marked a bounce-back week for the Dow; the index had retreated roughly 4.5% over the previous several weeks of trading after its record-high close of 17,138.20 on July 16.
This downturn was punctuated during the first trading session of the week by the yield on the ten-year Treasury note hitting its lowest level (2.42%) in over a year as investors looked for venues other than stocks to put their money to work. Contributing factors to the decline were geopolitical tensions and the concern the Federal Reserve would begin to raise interest rates sooner than previously expected. While geopolitical fears were anticipated to impact the market until the Russia/Ukraine situation is resolved, the sentiment on the Street was that the economy has a way to go before the Fed lifts rates.
Overall, the week’s trading activity resulted in $15.0 billion of net inflows to funds as all four of Lipper’s fund macro-groups experienced positive flows. Money market funds were responsible for the lion’s share of the net inflows and grew their coffers by $9.3 billion for the week. Taxable money market funds had net inflows of $9.7 billion to account for all of the group’s increase.
For the week, taxable bond funds took in $3.8 billion net. The net inflows were split relatively evenly between mutual funds and exchange-traded funds (ETFs), with each group taking in approximately $1.9 billion. High-yield mutual funds had positive flows of $500 million, as did the mutual funds in Lipper’s investment-grade debt classifications. ETF investors were buying iShares iBoxx $ High Yield Corporate Bond ETF (HYG, +$429 million) and iShares 1-3 Year Treasury Bond ETF (SHY, +$195 million).
Equity funds also experienced positive flows, with a net increase of $1.3 billion. All of the positive net flows came from equity ETFs (+$1.4 billion), while equity mutual funds had net outflows of $162 million. SPDR S&P 500 (SPY, +$3.3 billion) was the main contributor to the net inflows, while iShares Russell 2000 ETF (IWM) saw $1.4 billion leave its coffers.
Municipal bond funds marked their fifth consecutive week of positive flows with a net increase of $648 million for the week. The majority of the net inflows came from the mutual fund side (+$589 million), with the national muni debt fund group (+$604 million) accounting for all of the positive flows.