by Pat Keon, CFA.
Lipper’s fund asset groups (including both mutual funds and ETFs) had net positive flows of $3.9 billion for the fund-flows trading week ended Wednesday, May 15. Money market funds (+$14.5 billion) were responsible for the lion’s share of the net positive flows for the third straight week. The municipal debt fund (+$1.3 billion) and taxable bond fund (+$434 million) asset groups also contributed to the net inflows. Equity funds saw money leave their coffers (-$12.3 billion) for the fourth straight week. Equity funds have experienced slightly less than $25.0 billion in net outflows over the last two weeks—the group’s worst two-week stretch of the year.
The equity markets all finished the fund-flows trading week with losses as they could not overcome the continued escalation of the U.S./China trade war. The NASDAQ Composite Index was off 1.53%, while the Dow Jones Industrial Average and the S&P 500 Index closed down 1.23% and 0.99%, respectively. In response to the U.S. raising tariffs (from 10% to 25%) on $200 billion of Chinese goods at the end of last week, China retaliated on Monday by announcing that it would be raising tariffs (potentially up to 25%) on $60 billion of U.S. goods. The markets sold off heavily in response as the S&P 500 (-2.41%) and Dow (-2.38%) recorded their worst one-day losses since the first week of the year, while the NASDAQ’s (-3.41%) performance was its worst since early December 2018. The countries toned down the inflammatory rhetoric after Monday and the markets were able to recoup some of the losses, but not enough to climb out of the red.
The ETF universe experienced net outflows (-$9.2 billion) for the third week in four thanks to equity ETFs. Equity ETFs (-$10.0 billion) were responsible for all of the net outflows as taxable bond and muni debt ETFs took in $697 million and $19 million in net new money, respectively. For the second week in a row, SPDR S&P 500 ETF (SPY, -$6.0 billion) was responsible for more than half of the net outflows for equity ETFs, while for the taxable bond ETF group the largest individual net inflows belonged to iShares Core U.S. Aggregate Bond ETF (AGG, +$852 million) and iShares U.S. Treasury Bond ETF (GOVT, +$348 million).
Equity Mutual Funds
Equity mutual funds suffered their thirteenth straight weekly net outflows this week (-$2.3 billion). Domestic equity funds (-$2.1 billion) were once again responsible for most of the net outflows, while nondomestic equity funds contributed $190 million to the total. At the peer group level, Multi-Cap Value Funds (-$403 million) and International Multi-Cap Value Funds (-$82 million) accounted for the largest net outflows among the domestic and nondomestic groups.
Fixed Income Mutual Funds
Municipal bond funds (+$1.3 billion) extended their weekly consecutive net inflow streak to 19, but taxable bond funds had their streak broken at 17 weeks as the group suffered a net outflow of $263 million. For muni bond funds, the largest net inflows came from the Intermediate Muni Debt Funds (+$408 million) and High Yield Muni Debt Funds (+$384 million) peer groups. The High Yield Funds peer group—with net outflows of $1.9 billion—was the main driver of the net negative flows for the taxable bond funds group.
Money Market Mutual Funds
Money market funds (+$14.5 billion) took in net new money for the fourth straight week. Institutional U.S. Government Money Market Funds (+$16.4 billion) were responsible for the lion’s share of the net inflows while, conversely, the Institutional U.S. Treasury Money Market Funds (-$4.7 billion) had the largest net outflows among the money market peer groups.