For the fund-flows week ended October 22, 2014, the equity market rebounded sharply during the first four days, mitigating some of the prior week’s significant losses. Despite declining at the close of the period on Wednesday, the S&P 500 climbed 3.49% for the week, putting its year-to-date gain at 5.97%. Some investors returned as buyers in the equity market to help propel gains, believing it had become oversold following its recent declines. Additional data points that revealed better-than-anticipated domestic consumer sentiment readings and housing starts helped the market to rally on Friday, October 17. Strong earnings from Apple and reports that the European Central Bank is considering expanding its bond-purchasing program to include corporates aided the market the following Tuesday. The market declined on Wednesday amid profit taking, following the sharp rally experienced over the previous three days. The NASDAQ climbed 3.97% for the week, putting its 2014 return so far at 4.94%.
Investors were net sellers (-$8.2 billion) for the week of equity fund assets (including conventional funds and exchange-traded funds [ETFs]). Taxable bond funds (including ETFs) saw net inflows for a fifth consecutive week (+$6.2 billion), while money market funds witnessed net inflows of $12.4 billion for the week. The municipal bond funds macro-group (including ETFs) witnessed net inflows for a fifteenth consecutive week (+$41 million).
Equity funds (ex-ETFs) had net inflows (+$1.1 billion), following the previous week’s net outflows of $1.5 billion. Equity ETFs witnessed net outflows of $9.2 billion—for their largest weekly net outflows since the week ended August 6, 2014—with hedging activity likely contributing to the flow volume. Nondomestic equity mutual funds (excluding ETFs) had net outflows (-$200 million), while nondomestic equity ETFs also had net outflows (-$339 million) for a third week in a row. Domestic equity funds (ex-ETFs) had positive net flows of $1.3 billion, which were the strongest weekly net inflows since the flows week ended April 23, 2014. Meanwhile, domestic equity ETFs saw net outflows (-$8.9 billion) for this past week.
Lipper’s Emerging Markets Funds classification (excluding ETFs) had net outflows (-$135 million) for the week. The classification had witnessed net inflows during each of the previous five quarters, but it had net outflows during four of the last five weeks. Equity Income Funds saw net inflows (+$159 million) for a third week in a row.
SPDR S&P 500 ETF (SPY) had its largest weekly net outflows (-$6.0 billion) since August 6, 2014, following the previous week’s net inflows of $2.7 billion, possibly the result of short covering. Similarly, iShares Russell 2000 ETF (IWM) witnessed net outflows of $304 million, following the previous week’s net inflows of $2.3 billion. IShares MSCI Emerging Markets (EEM) had its sixth consecutive week of net outflows (-$4.2 million for the latest week), while IShares MSCI EAFE (EFA) had modest net inflows of a little less than $1 million.
Taxable bond funds (including ETFs) had $6.2 billion of net inflows for the week, as some investors appeared to favor this safe-haven asset class while the volatility gauges in the equity markets spiked higher in recent weeks. The Barclay’s U.S. Aggregate Bond Index fell 0.48% for the week but still remained well into positive total return territory so far for 2014, having climbed 5.57%. The bond market experienced modest losses as European and U.S. markets rebounded amid the release of encouraging domestic economic data points as well as an inflation report that led some investors to believe the Federal Reserve will not deviate for now from its path to normalization. The benchmark ten-year Treasury yield began the week at 2.15% and ended at 2.25%.
Taxable bond fund investors were net buyers of fixed income assets as some investors favored segments perceived to be less volatile than equities. Core bond funds (including ETFs) had strong net inflows (+$2.3 billion) for the week. Short-investment grade debt funds had their ninth consecutive week of net inflows (+$264 million). High-yield funds saw net inflows (+$1.7 billion), as investors appeared enticed by the relatively attractive yields in the corporate bond non-investment-grade segment, following recent price declines. Loan participation funds had their largest week of net outflows (-$1.6 billion) since the week ended August 17, 2011.
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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