by Tom Roseen.
Investors were overall net redeemers of fund assets (including those of conventional funds and ETFs) for the first week in four. They withdrew $10.1 billion for Refinitiv Lipper’s fund-flows week ended February 3, 2021. However, fund investors padded the coffers of taxable bond funds (+$12.0 billion) and tax-exempt fixed income funds (+$1.6 billion), while being net redeemer of money market funds (-$12.7 billion) and equity funds (-$11.0 billion) this week.
The broad-based U.S. indices finished the fund-flows week in positive territory as investors set aside concern of the GameStop short squeeze volatility and focused back on better-than-expected Q4 earnings reports, vaccine distributions progress, and increasing probability of another round of fiscal stimulus.
On the domestic side of the equation, the NASDAQ Composite Price Only Index (+2.56%) posted the strongest one-week returns of the other broadly followed U.S. indices for the fund-flows week, followed by the Russell 2000 Price Only Index (+2.42%). Like it has been the last few weeks, the Dow Jones Industrial Average Price Only Index (+1.39%) once again was the group’s relative laggard. Overseas, the Xetra DAX Total Return Index (+1.64%) posted the strongest returns of the other often-followed broad-based global indices, while the Shanghai Composite Price Only Index (-1.40%) witnessed the largest decline.
On Thursday, January 28, 2021, the Dow posted its biggest jump in three weeks, winning back some of its losses from its largest one-day selloff since October the day before. Investors focused on Q4 earnings reports from the likes of Apple and Facebook and positive economic data. First-time jobless claims from the week prior fell to the lowest level in three weeks to a seasonally adjusted 847,000, while an economic report showed the U.S. economy grew by a 4% annual pace in Q4. In volatile trading exacerbated by the GameStop short squeeze and disappointing vaccine news on Friday, January 29, stocks took a beating and posted their largest one-month loss since October 2020. Despite reports of declines in new COVID-19 cases, investors questioned the efficiency of vaccine rollouts and their effectiveness against new virulent strains. The January consumer sentiment index declined from 79.2 in December to 79. Nonetheless, the 10-year Treasury yield rose 3.5 basis points on the day, closing at 1.09%.
Stocks got a shot in the arm on Monday, February 1, 2021, as investors appeared to see the January declines as buying opportunities. Investors kept a keen eye on increasing chances of President Joe Biden’s $1.9 trillion economic aid proposal while weighing the news of a slight decline to the Institute of Supply Management’s (ISM) manufacturing index. Oil also rallied on the day, closing up 2.6% to $53.55 per barrel. The Dow posted its largest one-day gain in three months on Tuesday, February 2, as investors focused on earnings, fiscal stimulus, and improving vaccine news. Better-than-expected sales news from Google and Amazon and a reported decline in COVID-19 related hospitalizations helped shore up returns in cyclically oriented issues, with financials getting a shot in the arm by the steepening yield curve. The 10-year yield rose to a little shy of 1.11%, while near month crude oil closed at its highest level in more than a year (+$54.76/bbl). On Wednesday, February 3, U.S. stocks booked their third consecutive day of plus-side performance after the private sector employment figures from ADP showed the U.S. economy added 174,000 new jobs in January and crude oil prices closed up 1.7% on the day at $55.69/bbl. A stronger-than-expected January ISM service reading helped prop up equities and may have contributed to the 10-year Treasury yield rising to almost 1.13% as investors became more risk seeking.
Exchange-Traded Equity Funds
As the result of increased U.S. market volatility, equity ETFs witnessed their first week of net outflows in eight—handing back $6.5 billion (their largest weekly net outflows since September 23, 2020) for the most recent fund-flows week. Authorized participants (APs) were net redeemers of domestic equity ETFs (-$9.5 million), withdrawing money, also for the first week in eight. However, nondomestic equity ETFs witnessed net inflows for the seventh consecutive week, taking in $3.0 billion this past week. iShares Silver Trust ETF (SLV, +$2.6 billion) and JPMorgan BetaBuilders Developed Asia ex-Japan ETF (BBAX, +$885 million) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, SPDR S&P 500 ETF (SPY, -$8.4 billion) experienced the largest individual net redemptions, and iShares Russell 2000 ETF (IWM, -$3.2 billion) suffered the second largest net redemptions of the week.
Exchange-Traded Fixed Income Funds
For the third week in four, taxable fixed income ETFs witnessed net inflows, attracting $4.3 billion this last week. APs were net purchasers of corporate high-yield ETFs (+$2.0 billion), corporate investment-grade debt ETFs (+$817 million), and government-Treasury ETFs (+$798 million). Loan Participation ETFs, a component of the corporate investment-grade ETFs macro-group, took in $63 million for the flows week, marking their thirteenth consecutive week of net inflows. iShares iBoxx $ High Yield Corporate Bond ETF (HYG, +$1.8 billion) and JPMorgan High Yield Research Enhanced ETF (JPHY, +$512 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, -$695 million) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK, -$522 million) handed back the largest individual net redemptions for the week. For the fifteenth week in a row, municipal bond ETFs witnessed net inflows, taking in $378 million this week.
Conventional Equity Funds
Conventional fund (ex-ETF) investors were net redeemers of equity funds for the sixth consecutive week, withdrawing $4.5 billion this week, with the macro-group posting a 2.77% market gain for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly more than $3.0 billion, witnessed their sixth weekly net outflows while witnessing a 2.98% gain on average for the fund-flows week. Nondomestic equity funds—experiencing a 2.31% weekly gain on average—experienced their first week of net outflows in three, handing back $1.5 billion this past week. On the domestic equity side, fund investors continued to shun large-cap funds (-$2.6 billion) and mid-cap funds (-$312 million). Investors on the nondomestic equity side were net redeemers of international equity funds (-$930 million) and global equity funds (-$548 million).
Conventional Fixed Income Funds
For the sixth week in a row, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $7.7 billion this past week—while posting a 0.40% gain for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$5.3 billion), flexible funds (+$1.4 billion), and international & global debt funds (+$895 million) while being net redeemers of corporate high-yield funds (-$689 million). The municipal bond funds group posted a 0.31% gain on average during the week and witnessed its thirteenth consecutive weekly net inflows, attracting $1.2 billion this week. High Yield Municipal Debt Funds was the big attractor of investors’ assets for the week, taking in $568 million, followed by General & Insured Municipal Debt Funds (+$327 million).
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