by Pat Keon, CFA.
Lipper’s fund asset groups (including both mutual funds and exchange-traded funds) took in $32.0 billion in net new money for the fund-flows trading week ended Wednesday, July 10. All four fund asset groups had positive net flows for the week, paced by money market funds (+$27.9 billion), while taxable bond funds, equity funds, and municipal bond funds contributed $2.1 billion, $1.0 billion, and $1.0 billion, respectively, to the overall net inflows. It was the twenty-seventh consecutive net inflow for the municipal bond fund group—the group’s longest winning streak since its 54-week run from Q3 2015 to Q3 2016. The group took in approximately $38.1 billion during the previous streak, compared to $32.2 billion since the current streak began.
Equity markets rallied at the end of the fund-flows trading week on indications that the Federal Reserve would follow through on its recent dovish turn on interest rates. Overall, the NASDAQ Composite Index was up 0.40% for the week, while the Dow Jones Industrial Average (-0.39%) and the S&P 500 Index (-0.09%) both finished down. All of the indices experienced significant one-day increases on Wednesday, July 10, after comments from Fed Chairman Jerome Powell. He stated that “uncertainties around global growth and trade continued to weigh on the outlook.” The street took this as a signal that the Fed would lower rates at its July policy meeting, as the Fed had previously suggested rate cuts were a tool that could be used if the economic environment did not improve. Markets rallied after the Fed’s statement, as the NASDAQ, S&P 500, and Dow finished up 0.75%, 0.45%, and 0.29%, respectively, for the day.
ETFs took in $4.9 billion in net new money, driven by the equity ETF (+$4.3 billion) asset group. The net inflows for this group were concentrated in one product, as the SPDR S&P 500 ETF (SPY) was up $3.7 billion. Taxable bond (+$471 million) and municipal debt (+$124 million) ETFs also took in net new money for the week. The largest positive net flows for these groups came from iShares iBoxx $ High Yield Corporate Bond ETF (HYG, +$642 million), iShares MBS ETF (MBB, +$560 million), and iShares National Muni Bond ETF (MUB, +$68 million).
Equity Mutual Funds
Equity mutual funds (-$3.3 billion) suffered their twenty-first consecutive weekly net negative flows. The usual suspects were responsible for the outflows, as domestic equity mutual funds saw more than $2.6 billion leave their coffers. This was domestic equity mutual funds’ twenty-second straight weekly net outflow, for a total of -$87.1 billion. Taking a more granular look at this data indicates that diversified equity funds (-$2.4 billion) are responsible for the lion’s share of the net outflows for the domestic group.
Fixed Income Mutual Funds
Both taxable bond funds (+$1.6 billion) and municipal debt funds (+$885 million) had positive net flows for the week. Muni bond funds ran their streak of consecutive weekly net inflows to 27, while the taxable bond fund streak stands at four weeks. For the second consecutive week, the largest net inflows for taxable bond funds were attributable to the Core Plus Bond Funds (+$523 million) and Core Bond Funds (+$485 million) peer groups. The High Yield Muni Debt Funds (+$320 million) and General Muni Debt Funds (+$286 million) classifications paced the net inflows on the tax-exempt side of the ledger.
Money Market Mutual Funds
Money market funds (+$27.9 billion) had net positive flows for the third consecutive week for a total net intake of $76.0 billion. All of the money market peer groups took in net new money for the second consecutive week, with this week’s net inflows being paced by Institutional U.S. Government Money Market Funds (+$11.7 billion) and Institutional U.S. Treasury Money Market Funds (+$7.4 billion).