by Tom Roseen.
Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the fourth week in five. They injected $41.2 billion for Refinitiv Lipper’s fund-flows week ended February 10, 2021. Fund investors padded the coffers of equity funds (+$25.9 billion, their second largest weekly net inflows on record dating back to 1992), money market funds (+$7.8 billion), taxable bond funds (+$4.8 billion), and tax-exempt fixed income funds (+$2.6 billion, their fourth largest on record).
The broad-based U.S. indices finished the fund-flows week on a strong note as investors cheered news of solid Q4 corporate earnings, a rise in energy issues, and in anticipation of another large COVID-19 related fiscal aid package.
On the domestic side of the equation, the Russell 2000 Price Only Index (+5.68%) posted the strongest one-week returns of the other broadly followed U.S. indices for the fund-flows week, followed by the NASDAQ Composite Price Only Index (+2.66%). Breaking a recent laggard trend over the last few weeks, the Dow Jones Industrial Average Price Only Index (+2.32%) closed at a record high at the end of the fund-flows week. Overseas, the Shanghai Composite Price Only Index (+4.21%) posted the strongest returns of the other often-followed broad-based global indices, while the Xetra DAX Total Return Index (+0.98%) was the relative laggard.
On Thursday, February 4, 2021, the NASDAQ and S&P 500 closed at record highs on the day as investors cheered improving employment numbers, declining COVID cases and deaths, and the increasing chance of a large fiscal stimulus package being passed by Congress. First-time jobless claims declined for the third consecutive week at the end of January. U.S. stock indices rose to another fresh round of records on Friday, February 5, despite a disappointing January nonfarm payrolls report. The U.S. Department of Labor reported that 49,000 new jobs were added in January and the unemployment rate declined to 6.3%, but this left some pundits concerned that the labor market is cooling. However, this was seen by others to be a catalyst for U.S. lawmakers to push for another round of stimulus in order to shore up the economy. Earlier in the day, the Senate passed a budget resolution that could fast track the $1.9 trillion COVID relief package without Republican support. Oil futures continued their ascent and the 10-year Treasury yield rose 1.17%.
Stocks received another shot in the arm on Monday, February 8, 2021, as energy issues rallied, with Brent crude oil closing above the $60 per barrel (bbl) mark for the first time in more than a year. Solid Q4 corporate earnings and progress toward another round of increased fiscal spending contributed to market gains and the Dow posting its first record close since January 20. The NASDAQ and Russell 2000 posted record highs on Tuesday, February 9, while the Dow and S&P snapped a six-day winning streak with small declines on the day as the rally in equities lost some steam, but both near month oil (to +$58.36/bbl) and gold (to +$1,837.50/oz.) futures rose on the day. On Wednesday, February 10, the Dow booked another closing high after Federal Reserve Chair Jerome Powell said he remained focused on getting Americans back to work while stressing he was not concerned with inflation. The 10-year Treasury yield closed the fund flows week at 1.13%, while oil closed the day out up 0.6% at $58.68/bbl.
Exchange-Traded Equity Funds
Equity ETFs witnessed their eighth week of net inflows in nine—attracting $26.3 billion (their second largest weekly net inflows on record) for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$24.6 million), injecting money, also for the eighth week in nine. Nondomestic equity ETFs witnessed net inflows for the eighth consecutive week, taking in $1.7 billion this past week. iShares Core S&P 500 ETF (IVV, +$6.9 billion) and SPDR S&P 500 ETF (SPY, +$4.6 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, iShares Silver Trust ETF (SLV, -$931 million) experienced the largest individual net redemptions, and Health Care Select Sector SPDR ETF (XLV, -$691 million) suffered the second largest net redemptions of the week.
Exchange-Traded Fixed Income Funds
For the second week in a row, taxable fixed income ETFs witnessed net inflows, attracting $1.4 billion this last week. APs were net purchasers of corporate investment-grade ETFs (+$936 million), international & global debt ETFs (+$785 million), and flexible ETFs (+$405 million), while being net redeemers of government-Treasury ETFs (-$770 million). Loan Participation ETFs, a component of the corporate investment-grade ETFs macro-group, took in $592 million for the flows week, marking their fourteenth consecutive week of net inflows and third largest on record. iShares Core U.S. Aggregate Bond ETF (AGG, +$421 million) and iShares JPM USD Emerging Markets Bond ETF EMB +$342 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, -$1.2 billion) and iShares 20+ Year Treasury Bond ETF (TLT, -$569 million) handed back the largest individual net redemptions for the week. For the sixteenth week in a row, municipal bond ETFs witnessed net inflows, taking in $372 million this week.
Conventional Equity Funds
Conventional fund (ex-ETF) investors were once again net redeemers of equity funds for the seventh consecutive week, but withdrawing just $441 million this week, with the macro-group posting a 2.79% market gain for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly more than $1.7 billion, witnessed their seventh weekly net outflows while witnessing a 2.97% gain on average for the fund-flows week. Nondomestic equity funds—experiencing a 2.42% weekly gain on average—experienced their third week of net inflows in four, taking in $1.3 billion this past week. On the domestic equity side, fund investors continued to shun large-cap funds (-$3.9 billion) but padded the coffers of small-cap funds (+$1.3 billion). Investors on the nondomestic equity side were net purchasers of international equity funds (+$797 million) and global equity funds (+$484 million).
Conventional Fixed Income Funds
For the eighth week in a row, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $3.4 billion this past week—while posting a 0.58% gain for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$1.8 billion), flexible funds (+$753 million), and international & global debt funds (+$651 million) while being net redeemers of corporate high-yield funds (-$148 million). The municipal bond funds group posted a 0.31% gain on average during the week and witnessed its fourteenth consecutive weekly net inflows, attracting $2.3 billion this week. High Yield Municipal Debt Funds was the big attractor of investors’ assets for the week, taking in $745 million (their third strongest weekly net inflows on record), followed by Intermediate Municipal Debt Funds (+$534 million).
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