by Pat Keon, CFA.
Lipper’s fund asset groups (including both mutual funds and exchange-traded funds) recorded net inflows of $29.2 billion for the fund-flows trading week ended Wednesday, December 4. This was the thirteenth week out of the last 14 in which funds took in net new money. All four fund asset groups experienced net positive flows for the second consecutive week, paced by money market funds, which grew their coffers by $22.4 billion. Equity funds, taxable bond funds, and municipal bond funds contributed $5.0 billion, $1.2 billion, and $615 million, respectively, to the week’s total net inflows.
The major equity indices were in the red for the fund-flows trading week. The Dow Jones Industrial Average, the NASDAQ Composite Index, and the S&P 500 Index lost 1.83%, 1.59%, and 1.30%, respectively, this week. Despite these losses, all three indices are still in the black for the fourth quarter, led by the NASDAQ with a gain of 7.09%, while the S&P 500 and the Dow are up 4.57% and 2.72%. Trade tensions, as well as soft economic data, weighed down the markets this week. The week started off with lackluster in-store Black Friday sales hurting retail stocks and the release of a weak U.S. manufacturing report. The November report from the Institute for Supply Management indicated that U.S. factory activity fell for the fourth straight month and new orders fell to a level not seen since 2012. The U.S./China trade war escalated somewhat as differing points of view over the Hong Kong protests threatened trade talks, and President Trump stated that a trade deal with China might have to wait until after next year’s presidential election. In addition, Trump targeted Brazil, Argentina, and potentially France, with new tariffs. He announced that, effectively immediately, the tariffs on steel and aluminum from Brazil and Argentina would be reinstated. France was threatened with tariffs on more than $2 billion of their products in response to a new digital services tax in France that would hamper U.S. technology companies.
ETFs took in $8.4 billion in net new money last week for their eighth consecutive weekly net inflow. The net positive flows were driven by equity ETFs, which grew their coffers by $8.7 billion. The largest individual contributor by far among equity ETFs was the SPDR S&P 500 ETF (SPY) with an increase of $6.0 billion. Conversely, taxable bond ETFs saw $558 million leave last week in large part thanks to the iShares 7-10 Year Treasury Bond ETF (IEF) and iShares iBoxx $ High Yield Corporate Bond ETF (HYG), which suffered net outflows of $573 million and $327 million, respectively. Municipal bond ETFs had net positive flows of $204 million for the week.
Equity Mutual Funds
Equity mutual funds saw money leave for the forty-second consecutive week as they experienced net outflows of $3.8 billion. The lion’s share of this week’s net negative flows came from domestic equity funds (-$3.5 billion), while nondomestic equity funds had net outflows of $234 million. Among the peer groups, Large-Cap Growth Funds (-$666 million) and International Multi-Cap Value Funds (-$156 million) had the largest net outflows in the domestic and nondomestic equity fund universes.
Fixed Income Mutual Funds
Municipal debt funds (+$411 million) extended their run of net inflows to 48 weeks, while taxable bond funds (+$1.7 billion) ran their own net inflow streak to nine weeks. For taxable bond funds, the Ultra Short Obligation Funds (+$977 million) and Core Bond Funds (+$870 million) peer groups were the week’s largest contributors, while the General Muni Debt Funds (+$164 million) and High Yield Muni Debt Funds (+$81 million) groups paced the tax-exempt side of the ledger.
Money Market Mutual Funds
Money market funds (+$22.4 billion) had the largest net inflow among the asset groups. All of the money market fund peer groups recorded net inflows for the week, with the Institutional U.S. Government Money Market Funds (+$10.5 billion) and Institutional Money Market Funds (+$4.9 billion) taking in the most net new money.