by Pat Keon, CFA.
The money market funds asset group set a record for net inflows (+$259.8 billion) for the third consecutive week as the economic impact of the coronavirus continued to wreak havoc on investing. Conversely, taxable bond funds (-$62 billion) and municipal bond funds (-$13.7 billion) each had record-setting net outflows for the second consecutive week, while equity funds saw $27.1 billion leave as investors rushed to put assets on the sidelines.
Overall, Lipper’s fund asset groups (including both mutual funds and exchange-traded funds) took in $157 billion of net new money for the fund-flows trading week ended Wednesday, March 25.
Financial markets rallied as the $2 trillion stimulus package neared completion as the fund-flows trading week ended. The markets appeared poised for another disastrous double-digit percentage loss when news of the stimulus plan breathed life back into them, at least temporarily. The Dow Jones Industrial Average experienced its largest one-day percentage gain (+11.37%) since the Great Depression (1933) on the strength of this news. Overall, the Dow was up 6.54% for the week while the NASDAQ Composite Index and S&P 500 Index appreciated 5.64% and 3.23%, respectively.
Despite these gains, all three of the indices are still solidly in bear market territory as the Dow (-28.26%), S&P 500 (-26.89%), and the NASDAQ (-24.78%) are all down considerably more than 20% from their mid-February high-water marks. The stimulus package (which has passed the Senate and is expected to be approved by the House on Friday, March 27) dwarfs the package (estimated at approximately $800 billion) that was enacted to combat the global financial crisis in 2009. The current stimulus plan includes money for individuals, small businesses, enhanced unemployment benefits, state and local governments, health care providers, and $500 billion to prop up the hardest hit industries (including airlines).
ETFs saw money leave (-$19.5 billion) for the fifth straight week. All three asset groups had net outflows, led by equity ETFs (-$10.9 billion) and followed by taxable bond ETFs (-$8.1 billion) and municipal bond ETFs (-$607 million). On the equity side, iShares Core S&P 500 ETF (IVV) and Direxion Daily S&P Oil & Gas Exploration & Production Bull 3X Shares (GUSH) had the largest net outflows at $8 billion and $2.5 billion. The largest net outflows for taxable bond ETFs belonged to iShares Core U.S. Aggregate Bond ETF (AGG, -$3.7 billion) and iShares 20+ Year Treasury Bond ETF (TLT, -$2.7 billion). iShares National Muni Bond ETF (MUB) took the biggest hit (-$397 million) on the tax-exempt side.
Equity Mutual Funds
Equity mutual funds suffered net outflows (-$16.3 billion) for the thirteenth straight week. The net negative flows were fairly evenly split between domestic equity funds (-$8.9 billion) and nondomestic equity funds (-$7.4 billion). Among the peer groups, Large-Cap Growth Funds (-$2.4 billion) had the largest net outflows on the domestic side, while the largest net outflows for the non-domestic peer groups belonged to International Multi-Cap Core Funds (-$1.0 billion).
Fixed Income Mutual Funds
Taxable bond funds (-$53.9 billion) and muni bond funds (-$13.1 billion) both experienced record setting net outflows for the second consecutive week. The most significant net outflows on the taxable side were attributable to the Ultra Short Obligation Funds (-$14.8 billion) and Core Bond Funds (-$9.8 billion) peer groups. On the tax-exempt side of the ledger, High Yield Muni Debt Funds (-$4.3 billion) and General Muni Debt Funds (-$3.8 billion) paced the net outflows.
Money Market Mutual Funds
For the third consecutive week, money market funds obliterated their weekly best for net inflows. This week’s total (+$258.9 billion) beat last week’s results by almost $112 billion. The peer groups that benefitted the most from money being put on the sidelines to wait out the uncertainty from the virus were Institutional U.S. Government Money Market Funds (+$141.7 billion) and Institutional U.S. Treasury Money Market Funds (+$124.5 billion).