October 1, 2020

U.S. Weekly FundFlows Insight Report: ETF Investors Remain Enamored with Equities During the Fund-Flows Week

by Tom Roseen.

Shrugging off plus-side returns for the week, for the eighth week in a row investors were overall net redeemers of fund assets (including those of conventional funds and ETFs), withdrawing $15.9 billion for Refinitiv Lipper’s fund-flows week ended September 30, 2020. Fund investors were net redeemers of all four asset classes, withdrawing $14.0 billion from money market funds, $1.1 billion from taxable fixed income funds, $775 million from municipal bond funds, and $9 million from equity market funds this week.

Market Wrap-Up

U.S. markets managed to post handsome plus-side returns during the fund-flows week despite experiencing their first monthly decline since March as hopes faded on another round of fiscal stimulus from Capitol Hill before the November elections. Nonetheless, for the fund-flows week jobs and housing remained bright spots in the U.S.

On the domestic side of the equation, the NASDAQ Composite Price Only Index (+5.03%) witnessed the strongest plus-side return for the fund-flows week of the broadly followed U.S. indices, while the Dow Jones Industrial Average Price Only Index (+3.81%) was the group’s relative laggard. Overseas, the Xetra DAX Price Only Index (+1.39%) chalked up the largest plus-side return of the often-followed broad-based global indices, while the Shanghai Composite Price Only Index (-2.15%) suffered the largest decline.

On Thursday, September 24, equities witnessed small gains as investors assessed the implications of the softening economy and the lack of progress on a second round of COVID-19 stimulus. U.S. stocks, however, witnessed a brief run after reports indicated that Democratic lawmakers had begun to prepare a new $2.4 trillion package. New single-family home sales in August were also supportive of market advances early in the session. On Friday, stocks closed higher, pushing the NASDAQ to its first weekly gain since August, while the Dow and S&P 500 posted their fourth weekly losses after August durable goods orders rose a lower-than-expected 0.4%.

U.S. stocks closed higher on Monday, September 28, as investors appeared to do a little bargain shopping ahead of the first presidential debates, with the Russell 2000 outpacing the other broad-based indices for the day. However, on Tuesday all three of the major U.S. indices broke their three-day winning streak—shrugging off news that September consumer confidence rebounded to 101.8 from 86.3 in August—as reports showed the global pandemic death toll surpassed the one million mark. Near-month crude oil futures took it on the chin for the day, closing at $39.29 per barrel. Despite a chaotic and disappointing first presidential debate for both candidates the night before, all three indices ended up on Wednesday, September 30, after the National Association of Realtors said August home contract signings were at a record high and payroll services provider, ADP LLC, announced that the U.S. private sector had created 749,000 jobs in September, beating analyst expectations.

Exchange-Traded Equity Funds

Equity ETFs witnessed net inflows for the fourth week in five, attracting $5.0 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$4.3 billion), injecting money also for the fourth week in five. And for the seventh week in eight, nondomestic equity ETFs witnessed net inflows, taking in $654 million this past week. Invesco QQQ Trust 1 ETF (QQQ, +$2.5 million) and SPDR S&P 500 ETF (SPY, +$2.5 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Consumer Staples Select Sector SPDR ETF (XLP, -$657 million) experienced the largest individual net redemptions, and Financial Select Sector SPDR ETF (XLF, -$460 million) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the fifth week in six, taxable fixed income ETFs witnessed net inflows, taking in $608 million this last week. APs were net purchasers of government-Treasury ETFs (+$645 million) and government-mortgage ETFs (+$645 million) while being net redeemers of corporate high-yield ETFs (-$1.1 billion). iShares 20+ Year Treasury Bond ETF (TLT, +$426 million) and iShares Core US Aggregate Bond ETF (AGG, +$417 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares iBoxx $ High Yield Corporate Bond ETF (HYG, -$1.2 billion) and iShares Short Treasury Bond ETF (SHV, -$409 million) handed back the largest individual net redemptions for the week. For the first week in four, municipal bond ETFs witnessed net outflows, handing back $114 million this week.

Conventional Equity Funds

For the twenty-third week in a row, conventional fund (ex-ETF) investors were net redeemers of equity funds, withdrawing $5.0 billion, with the macro-group posting a 3.20% market return for the fund-flows week (its second week in three of plus-side returns). Domestic equity funds, suffering net redemptions of slightly less than $3.3 billion, witnessed their sixteenth consecutive weekly net outflows while posting a 3.73% return on average for the fund-flows week. Nondomestic equity funds—posting a 2.05% return on average—experienced their sixth consecutive week of net outflows, handing back $1.7 billion this past week. On the domestic equity side, fund investors shunned large-cap funds (-$2.7 billion) and equity income funds (-$297 million). Investors on the nondomestic equity side were net redeemers of international equity funds (-$1.7 billion) while being net redeemers of global equity funds (-$80 million).

Conventional Fixed Income Funds

For the first week in 25, taxable bond funds (ex-ETFs) witnessed net outflows—handing back $1.7 billion this past week—while posting a 0.51% return for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$1.8 billion) and government-Treasury and mortgage funds (+$128 million), while corporate high-yield funds (-$2.5 billion) witnessed the largest net outflows of the group. Municipal bond funds (ex-ETFs) witnessed net outflows for the first week in 21, handing back $661 million. Returns for the municipal bond fund macro-group were basically flat (0.00%) for the week.

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