July 23, 2020

U.S. Weekly FundFlows Insight Report: Investors Inject $13.9 Billion into Long-Term Funds and ETFs During the Fund-Flows Week

by Tom Roseen.

For the second week in three, investors were overall net purchasers of fund assets (including those of conventional funds and ETFs), injecting $34.4 billion for Refinitiv Lipper’s fund-flows week ended July 22, 2020. Fund investors were net purchasers of money market funds (+$20.4 billion), taxable fixed income funds (+$11.1 billion), municipal bond funds (+$2.1 billion), and equity funds (+$746 million) this week.

Market Wrap-Up

Despite a rising number of reported COVID-19 cases and increasing Sino-American tensions, the U.S. market continued to rally during the fund-flows week as investors focused on bettered-than-feared corporate earnings reports, a recently signed European Union coronavirus rescue package, and relatively strong economic reports.

On the domestic side of the equation, the S&P 500 Price Only Index (+1.53%) and the NASDAQ Composite Price Only Index (+1.48%) witnessed the strongest returns for the fund-flows week of the broadly followed U.S. indices. Overseas, the Xetra DAX Total Return Index (+2.89%) chalked up the only plus-side return of the often-followed broad-based global indices, while the Nikkei 225 Prince Only Index (-1.17%) witnessed the largest declines.

On Thursday, July 16, the Dow snapped a four-day winning streak as investors weighed mixed corporate earnings results and an increase in U.S./China tensions. While a couple of U.S. banks reported Q2 profits that beat analyst expectations and June retail sales rose 7.5% compared the 5.4% forecasts, Chinese stocks suffered their largest one-day decline since the start of the pandemic. This came after Beijing reported lower-than-expected consumer economic data and the Trump administration proposed a travel ban to the U.S. on members of the Chinese Communist Party. On Friday, July 17, stocks were mixed as investors weighed disappointing consumer sentiment data and assessed the potential for additional U.S. and European fiscal stimulus to combat the impact of COVID-19.

However, on Monday, July 20, all three broad-based U.S. market indices got a shot in the arm after the rally in technology issues helped the NASDAQ close at a record high. Investors focused on developments in coronavirus vaccines and fresh stimulus talks on Capitol Hill.

The Dow and S&P continued their upward climb on Tuesday after investors learned that the European Union codified a historical $860 billion coronavirus rescue fund. Nonetheless, near-month gold futures rocketed to their highest close since September 2011, settling at $1,843.90 per ounce. On Wednesday, July 22, the Dow closed above 27,000 for the first time in six weeks as investors embraced defensive issues as Sino-American tensions increased. Additionally, investors weighed the impact of another U.S. stimulus package not being confirmed before the “additional” $600-per-week jobless benefits run out at month end. On a brighter note, June existing home sales jumped 20.7% and, according to Refinitiv’s proprietary research team, of the 58 firms that have reported Q2 earnings results thus far, 77.6% have beaten analysts’ expectations.

Exchange-Traded Equity Funds

For the second week in three, equity ETFs witnessed net inflows, taking in $10.0 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$9.5 billion), injecting money for the third week in four. For the second consecutive week, nondomestic equity ETFs witnessed net outflows, although they attracted just $441 million this past week. SPDR S&P 500 ETF (SPY, +$4.2 billion) and iShares Russell 2000 ETF (IWM, +$1.7 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Utilities Select Sector SPDR ETF (XLU, -$721 million) experienced the largest individual net redemptions, and SPDR Dow Jones Industrial Average ETF (DIA, -$585 million) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the seventeenth week in a row, taxable fixed income ETFs witnessed net inflows, taking in $4.9 billion this last week. APs were net purchasers of corporate investment-grade debt ETFs (+$2.4 billion) and corporate high-yield ETFs (+$2.4 billion) while being net redeemers of government-Treasury ETFs (-$986 million). iShares iBoxx $ High Yield Corporate Bond ETFs (HYG, +$874 million) and iShares Core U.S. Aggregate Bond ETF (AGG, +$583 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares Short Treasury Bond ETF (SHV, -$498 million) and SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL, -$421 million) handed back the largest individual net redemptions for the week. For the sixth consecutive week, municipal bond ETFs witnessed net inflows, taking in $529 million this week.

Conventional Equity Funds

For the thirteenth week in a row, conventional fund (ex-ETF) investors were net redeemers of equity funds, withdrawing $9.2 billion, with the macro-group posting a 1.53% market return for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly less than $6.3 billion, witnessed their sixth consecutive weekly net outflows while posting a 1.60% market return on average for the fund-flows week. Nondomestic equity funds—posting a 1.36% return on average—experienced their sixteenth consecutive weekly net outflows, handing back $3.0 billion this past week. On the domestic equity side, fund investors shunned large-cap funds (-$4.4 billion) and equity income funds (-$1.1 billion). Investors on the nondomestic equity side were net redeemers of international equity funds (-$2.2 billion) and global equity funds (-$811 million).

Conventional Fixed Income Funds

For the fifteenth week in a row, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $6.2 billion this past week—while posting a 0.79% return for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$5.3 billion) and corporate high-yield debt funds (+$1.5 billion), while flexible funds (-$487 million) and balanced funds (-$335 million) witnessed the largest net outflows of the group. For the eleventh consecutive week, municipal bond funds (ex-ETFs) witnessed net inflows—taking in $1.8 billion. The fund group posted a 0.33% return on average for its twelfth straight weekly market gain.

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