For the fund-flows week ended November 5, 2014, the equity market posted solid gains as the S&P 500 climbed 2.13% and managed to close the period at a record high. The domestic equity market extended its late-October rally and was bolstered by a strong earnings report from Visa on Thursday, October 30, and again on Friday as the Bank of Japan unexpectedly announced its intention to expand stimulus measures. Stocks declined modestly on the following Monday and Tuesday, partly on deflation concerns as oil prices continued to slide. However, the market closed out the period on a positive note, aided by U.S. mid-term elections and a report showing better than anticipated private sector payroll numbers for October.
The NASDAQ composite climbed 1.64% for the flows week, putting its 2014 return so far at 10.70%. Small-cap stocks lagged larger-cap stocks, with the Russell 2000 returning 1.83% for the week. The year-to-date return for the Russell 2000 (+1.35%) still significantly trailed that for large-caps, following several recent weeks of underperformance.
Investors were net buyers (+$15.4 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 seventh consecutive week (+$6.3 billion), while money market funds witnessed net inflows of $2.5 billion. The municipal bond funds macro-group (including ETFs) witnessed net inflows of $85 million.
Equity funds (ex-ETFs) had net inflows (+$0.3 billion), following the previous week’s net outflows of $1.0 billion. Equity ETFs witnessed strong net inflows of $15.1 billion—for their largest weekly net inflows since the week ended September 18, 2013. Nondomestic equity mutual funds (excluding ETFs) had net inflows (+$1.3 billion), while nondomestic equity ETFs also had net inflows (+$117 million) for a second week in a row. Domestic equity funds (ex-ETFs) had net outflows for the second week in a row (-$991 million). Meanwhile, domestic equity ETFs saw net inflows of $15.0 billion, which were the largest net inflows since those of the week ending September 14, 2011. Much of this ETF activity was likely due to hedging activity by institutional investors.
SPDR S&P 500 ETF (SPY) had large individual net inflows (+$7.1 billion) for the second consecutive week. (The previous week’s net inflows were $7.2 billion.) The two weeks of net inflows were likely the result of hedging activity and institutional investors seeking to capitalize on the uptick in the domestic equity market. Similarly, iShares Russell 2000 ETF (IWM) witnessed a large net inflow of $2.0 billion.
The Barclay’s U.S. Aggregate Bond Index fell 0.11% for the week but still remained well into positive total return territory — so far for 2014, up 5.04%. The bond market experienced modest losses as global equity markets generally rose following the Bank of Japan’s announcement of its new stimulus measures and the release of encouraging domestic economic data points. The benchmark ten-year Treasury yield began the week at 2.34% and ended at 2.38%.
Core-plus bond funds (excluding ETFs) had strong net inflows (+$1.8 billion). This fund group saw for the past six consecutive weeks net inflows totaling $12.5 billion. High-yield funds saw net inflows (+$2.3 billion) this past week, while loan participation funds had net outflows (-$0.3 billion).
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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