by Tom Roseen.
After a shortened Thanksgiving trading week, energy stocks were pummeled by OPEC’s decision to maintain its current production ceiling—pulling down the major indices on the last trading day of November. Front-month crude oil prices plunged a whopping 17.74% for November to close at the lowest settlement price since September 25, 2009. On Monday, December 1, the major indices witnessed sharp declines as disappointing economic news from China and a downgrade by Moody’s led to a fit of selling. Investors were initially disappointed by early reports of weaker-than-expected Black Friday sales, and their mood was exacerbated by news that that Moody’s had downgraded Japan from Aa3 to A1. However, just a day later, U.S. stocks posted their largest one-day gain in a month as M&A deals in the pharmaceutical and technology sectors buoyed the markets. Markets also got a lift after November car and light truck sales came in at the second highest level in eight years. The icing on the cake was a rebound in oil and gold prices on Wednesday, which lifted the energy, materials, and industry sectors and catapulted the S&P 500 and Dow Jones Industrial Average to their forty-eighth and thirty-third record close of the year, respectively.
With all this as a backdrop, fund investors—for the seventh consecutive week—were net purchasers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), injecting $22.0 billion for the week. As cautious investors became slightly more risk seeking, they injected some $1.6 billion into the coffers of equity funds, $1.2 billion into taxable bond funds, and $0.2 billion into municipal bond funds, but the lion’s share of net new money was injected into money market funds—to the tune of $19.0 billion.
For the sixth consecutive week, equity ETFs witnessed net inflows, taking in $5.9 billion. Embracing the good news, authorized participants (APs) were net purchasers of domestic equity funds (injecting $5.1 billion into that subgroup) and nondomestic equity funds (+$0.8 billion). SPDR S&P 500 ETF (+$1.0 billion) attracted the largest net draw of all individual ETFs. Energy Select Sector SPDR ETF (+$0.7 billion) took in the next largest amount of net new money for the week. At the bottom of the group, SPDR S&P Retail ETF suffered the largest net redemptions, handing back $280 million.
For the second week in a row, conventional fund investors were net sellers of equity funds (ex-ETFs), withdrawing a net $4.3 billion from the group. Domestic equity funds, handing back some $3.4 billion, witnessed their fifth week of net outflows in six—and their largest weekly net redemptions since December 18, 2013. Meanwhile, their nondomestic equity fund counterparts suffered $0.9 billion of net redemptions—handing back money for the fourth consecutive week. On the domestic side, investors turned their backs on large-cap funds and small-cap funds, redeeming a net $1.8 billion and $0.6 billion, respectively. On the nondomestic side, international equity funds witnessed $0.8 billion of net redemptions, while the emerging-market equity, Pacific ex-Japan, Pacific region, and Japanese fund groups attracted net new money totaling a little over $75 million.
For the seventeenth consecutive week, taxable bond funds (ex-ETFs) witnessed net inflows, taking in a little under $1.6 billion. Corporate investment-grade debt funds attracted the largest sum of net new money, taking in a net $1.6 billion, while corporate high-yield funds witnessed the largest net redemptions, handing back some $0.6 billion—for their second consecutive week of net outflows. After learning from ADP that private-sector employment added around 200,000 new jobs for November, investors appeared to be comfortable with the thought that the Fed will not be raising interest rates anytime soon. A subset of the corporate investment-grade debt funds group—bank loan funds—witnessed net outflows (-$507 million) for a twenty-first consecutive week. Municipal debt funds (ex-ETFs) witnessed their fifth consecutive week of net inflows, taking in $164 million after having their second consecutive week of returns in the black (just 0.31% for this past week).
For more information on this week’s Lipper fund flows data, please refer to Lipper’s U.S. Fund Flows website or watch the following video: