January 24, 2019

U.S. Weekly FundFlows Insight Report: Mutual Fund and ETF Fund Flows Turn Positive for the Week

by Tom Roseen.

For the second week in three, investors were overall net purchasers of fund assets (including those of conventional funds and ETFs), injecting $5.8 billion for Lipper’s fund-flows week ended January 23, 2019.  Fund investors were net purchasers of equity funds (+$3.5 billion), money market funds (+$838 million), municipal bond funds (+$834 billion), and taxable fixed income funds (+$627 million).

Market Wrap-Up

Investors remained mostly upbeat during the fund-flows week, cheering news the Trump administration might be considering easing tariffs on Chinese imports and that the earnings season is off to a fair start, while keeping a keen eye on concerns of global growth and corporate guidance. The Dow Jones Industrial Average Price Only Index (+1.52%) posted the strongest returns of the broad-based indices for the flows week, followed by the S&P 500 Price Only Index’s 0.86% plus-side return. However, the NASDAQ Composite Price Only Index was unable to hold onto gains, declining 0.13% for the week. Investors remained bullish on overseas issues after news of the U.S.’s possible concessions on Chinese tariffs and Theresa May’s government narrowly surviving a no-confidence vote in the UK, with the FTSE 100 Price Only Index (+1.27%) and the Xetra DAX Total Return Index (+1.15%) posting the strongest returns of the broadly followed overseas indices.

At the beginning of the flows week, stocks ended higher after a Wall Street Journal report noted U.S. officials might consider lifting some tariffs on Chinese goods in an effort to stabilize the financial markets. On Thursday, January 17, investors also embraced news that Americans applying for unemployment benefits in the prior week fell to 213,000 from 216,000. Stocks rose for fourth consecutive day on Friday after optimism over a potential bilateral trade deal between the U.S. and China offset worries about mixed earnings reports and the continued impasse on the partial government shutdown. On the day, the Federal Reserve reported December industrial production rose 0.3%, in line with analyst expectations; however, the University of Michigan’s January consumer confidence index fell to 90.7, its lowest level in more than two years.

The U.S. markets were closed on Monday, January 21, in observance of Martin Luther King Jr. Day. On Tuesday, stocks broke a four-day winning streak after investors learned the U.S. formally requested extradition of Huawei’s chief financial officer, Meng Wanzhou, from Canada, raising concerns negotiations with China might become even more heated. News that the International Monetary Fund cut its global growth forecast to 3.5% in 2019 from 3.7%, and that existing home sales fell to a three-year low didn’t help market performance.  Despite escalating political unrest in Venezuela, strong earnings and revenue reports from the likes of IBM, Proctor & Gamble, and United Technologies helped push stock indices into the black on Wednesday, January 23.

Exchange-Traded Equity Funds

For the second week in three, equity ETFs witnessed net inflows, but they were paltry at a little more than $7 million for the most recent fund-flows week. Authorized participants (APs) were net redeemers of domestic equity ETFs (-$800 million) for the second week in a row. However, nondomestic equity ETFs witnessed net inflows for the sixteenth week in 17, attracting $808 billion this past week. Invesco QQQ Trust 1 (+$1.9 billion) and iShares Core MSCI Emerging Markets ETF (+$1.3 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, SPDR S&P 500 ETF (-$1.5 billion) experienced the largest individual net redemptions and Financial Select Sector SPDR Fund (-$855 million) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the first week in ten, taxable fixed income ETFs witnessed net outflows, handing back $352 million. APs were net purchasers of government-mortgage ETFs (+$837 million) and flexible ETFs (+$87 million), while being net redeemers of corporate investment-grade debt ETFs (-$876 million) and corporate high-yield debt ETFs (-$365 million). iShares MBS ETF (+$826 million) and iShares JPM USD Emerging Markets Bond ETF (+$449 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares 3-7 Year Treasury Bond ETF (-$617 billion) and iShares iBoxx $ Investment-Grade Corporate Bond ETF (-$605 million) handed back the largest individual net redemptions for the week. For the second week in a row, municipal bond ETFs witnessed net outflows, handing back $118 million.

Conventional Equity Funds

For the third consecutive week, conventional fund (ex-ETF) investors were net purchasers of equity funds, injecting $3.5 billion. Domestic equity funds, taking in a little more than $1.7 billion, also witnessed their third weekly net inflows while posting a 0.59% return on average for the fund-flows week. Their nondomestic equity fund counterparts, posting a 0.52% return on average, witnessed their third weekly net inflows (+$1.7 billion this past week). On the domestic equity side, fund investors embraced large-cap funds (+$1.2 billion net) and small-cap funds (+$603 million), while on the nondomestic equity side investors were net purchasers of international equity funds (+$1.5 billion) and global equity funds (+$162 million).

Conventional Fixed Income Funds

For the second consecutive week, taxable bond funds (ex-ETFs) witnessed net inflows, taking in $979 million this past week while posting a 0.20% return for the flows week. Fund investors were net purchasers of corporate investment-grade debt funds (+$718 million) and flexible funds (+$198 million), while balanced funds handed back some $168 million, bettered by government-Treasury funds (-$45 million). For the third week running, municipal bond funds (ex-ETFs) witnessed net inflows, taking in $952 million while posting a 0.10% loss on average (their first weekly loss in 11).

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