by Pat Keon, CFA.
Lipper’s fund asset groups (including both mutual funds and exchange-traded funds) recorded net inflows of slightly more than $5.0 billion for the fund-flows trading week ended Wednesday, October 16. This was the seventh straight net positive flow for the fund groups, as taxable bond funds (+$6.3 billion), equity funds (+$3.1 billion), and municipal bond funds (+$1.2 billion) all were on the plus side for the week. In a reversal of fortune, and after six consecutive net inflows, money market funds saw $5.6 billion leave their coffers this week.
The equity markets appreciated sharply on the strength of optimism about the U.S/China trade talks as well as an upbeat start to corporate earnings season. For the fund-flows trading week, the NASDAQ Composite Index, Dow Jones Industrial Average, and the S&P 500 Index recorded gains of 2.79%, 2.49%, and 2.41%, respectively. The trading week got off to a rousing start as all three indices captured the majority of their respective gains at the start of the week thanks to a thaw in the U.S./China trade war. The culmination of the trade talks came on Friday as it was announced that an agreement had been reached that would ease trade tensions and would include the elimination of some of the planned tariffs. President Donald Trump labeled this a “substantial, phase-one deal,” implying that there was more to come. Later in the week, the markets benefited from a strong start to the corporate earnings season for the third quarter as better than expected results from the financial sector (JPMorgan Chase, Wells Fargo, and Citigroup) carried the day.
ETFs took in almost $14.0 billion in net new money as all three asset groups participated. Equity ETFs led the charge with net inflows of $10.0 billion thanks to SPDR S&P 500 ETF (SPY, +$3.2 billion), Invesco QQQ Trust 1 (QQQ, +$1.2 billion), and iShares Russell 2000 ETF (IWM, +$1.1 billion). The net positive flows (+$3.9 billion) for taxable bond ETFs were driven by iShares iBoxx $ High Yield Corporate Bond ETF (HYG, +$902 million) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK, +$649 million). Muni bond ETFs took in $109 million in net new money for the week.
Equity Mutual Funds
Equity mutual funds (-$6.8 billion) saw money leave their coffers for the thirty-fifth straight week. Both domestic equity funds (-$4.6 billion) and nondomestic equity funds (-$2.3 billion) were responsible for this week’s net negative flows. The largest net outflows in the two regions belonged to Multi-Cap Core Funds (-$1.6 billion) and International Multi-Cap Growth Funds (-$677 million).
Fixed Income Mutual Funds
Municipal debt funds (+$1.1 billion) ran their streak of weekly net inflows to 41, while taxable bond funds (+$2.4 billion) were on the plus side for the second consecutive week. As usual, the national muni debt peer groups paced the net inflows, with General Muni Debt Funds (+$501 million) and High Yield Muni Debt Funds (+$259 million) taking in the most net new money. On the taxable side of the ledger, the net inflows were paced by the Core Plus Bond Funds (+$758 million) and Ultra-Short Obligation Funds (+$538 million) peer groups.
Money Market Mutual Funds
Money market funds (-$5.6 billion) saw money leave for the first time in seven weeks. The Institutional U.S. Government Money Market Funds (-$12.8 billion) and Institutional U.S. Treasury Money Market Funds (-$3.9 billion) peer groups were responsible for all of the net outflows, while the largest net inflows belonged to U.S. Government Money Market Funds (+$3.5 billion).