August 6, 2020

U.S. Weekly FundFlows Insight Report: Investors Withdraw $7.2 Billion From Equity 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 $3.4 billion for Refinitiv Lipper’s fund-flows week ended August 5, 2020. Fund investors were net purchasers of taxable fixed income funds (+$9.2 billion) and municipal bond funds (+$1.6 billion) while being net redeemers of equity funds (-$7.2 billion) and money market funds (-$216 million) this week.

Market Wrap-Up

Investors pushed markets higher during the fund-flows week, supported by hopes for an agreement by Congress to fund another fiscal relief package, on better-than-expected Q2 corporate earnings reports, and economic data that surprised to the upside.

On the domestic side of the equation, the NASDAQ Composite Price Only Index (+4.32%) and the Russell 2000 Price Only Index (+3.04%) witnessed the strongest returns for the fund-flows week of the broadly followed U.S. indices. Overseas, the Shanghai Composite Price Only Index (+3.22%) chalked up the largest plus-side return of the often-followed broad-based global indices, while the Xetra DAX Total Return Index (-0.36%) witnessed the only decline.

On Thursday, July 30, the Dow and the S&P 500 finished the day on the downside, while the NASDAQ clawed its way back to another round in the black as investors grappled with news of Q2 GDP coming in at negative 32.9% (its worst reading on record), first-time unemployment claims rose for the prior week, and there were no signs that lawmakers were nearing agreement on another coronavirus relief package. However, the Federal Reserve Board left interest rates unchanged and committed to provide support to the economy.

However, on Friday, July 31, stocks closed modestly higher as investors weighed the conflicting signals of several big tech stocks reporting strong Q2 earnings reports, while energy stocks took it on the chin after posting poor second quarter results. Investors appeared somewhat hesitant after learning that July U.S. consumer sentiment slipped to 72.5 after registering a 73.2 reading for June and that the U.S. saw record COVID-19 deaths in Arizona, Florida, and Texas. The 10-year Treasury yield declined to 0.55% (its lowest closing value since March 10, 2020).

The NASDAQ closed at another record high on Monday, August 3, after the Institute of Supply Management reported that its manufacturing measure rose to 54.2 and new orders rose to 61.5, both beating analyst expectations. The markets were additionally supported by better-than-expected manufacturing purchasing managers index (PMI) readings from Europe and China. Both gold and crude oil futures rose on the day. On Tuesday, the NASDAQ booked another record close but took a backseat to the beaten down sectors of energy, consumer staples, and real estate as investors evaluated another round of good earnings reports, a reported slowing of coronavirus infections in the U.S., and bet on a resolution from lawmakers for a fresh COVID-19 aid package. The 10-year Treasury yield closed near an all-time closing low and near-month gold prices rose to a record finish of more than $2,000, closing at $2,021 an ounce. On Wednesday, August 5, the NASDAQ booked its thirty-first record close for 2020 after investors cheered strong corporate earnings and were pleasantly surprised by better-than-expected service sector data. The July ISM service sector PMI rose to 58.1, signaling economic expansion.

Exchange-Traded Equity Funds

For the first week in three, equity ETFs witnessed net outflows, handing back $3.4 billion for the most recent fund-flows week. Authorized participants (APs) were net sellers of domestic equity ETFs (-$3.3 billion), withdrawing money for the first week in three. For the second consecutive week, nondomestic equity ETFs witnessed net outflows, although they handed back just $143 million this past week. SPDR Gold ETF (GLD, +$1.7 billion) and iShares Core MSCI Total International Stock ETF (IXUS, +$374 million) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, iShares Russell 2000 ETF (IWM, -$1.8 billion) experienced the largest individual net redemptions, and SPDR S&P 500 ETF (SPY, -$1.4 billion) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the nineteenth week in a row, taxable fixed income ETFs witnessed net inflows, taking in $1.2 billion this last week. APs were net purchasers of corporate high-yield ETFs (+$2.8 billion) and corporate investment-grade debt ETFs (+$1.6 billion) while being net redeemers of government-Treasury ETFs (-$4.2 billion). iShares iBoxx $ High Yield Corporate Bond ETFs (HYG, +$1.1 billion) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK, +$748 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares 7-10 Year Treasury Bond ETF (IEF, -$2.2 billion) and SPDR Portfolio Intermediate Term Treasury ETF (SPTI, -$1.7 billion) handed back the largest individual net redemptions for the week. For the fourteenth consecutive week, municipal bond ETFs witnessed net inflows, taking in $229 million this week.

Conventional Equity Funds

For the fifteenth week in a row, conventional fund (ex-ETF) investors were net redeemers of equity funds, withdrawing $3.8 billion, with the macro-group posting a 1.48% market return for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly more than $2.8 billion, witnessed their eighth consecutive weekly net outflows while posting a 1.86% market return on average for the fund-flows week. Nondomestic equity funds—posting a 0.66% return on average—experienced their eighteenth consecutive weekly net outflows, handing back $935 million this past week. On the domestic equity side, fund investors shunned large-cap funds (-$1.6 billion) and small-cap funds (-$992 million). Investors on the nondomestic equity side were net redeemers of international equity funds (-$218 million) and global equity funds (-$717 million).

Conventional Fixed Income Funds

For the seventeenth week in a row, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $8.0 billion this past week—while posting a 0.55% return for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$5.6 billion) and corporate high-yield debt funds (+$1.6 billion), while balanced funds (-$364 million) witnessed the largest net outflows of the group. For the thirteenth consecutive week, municipal bond funds (ex-ETFs) witnessed net inflows—taking in $1.4 billion. The fund group posted a 0.58% return on average for its fourteenth straight weekly market gain.

 

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