U.S. Weekly FundFlows Insight Report: Equity Funds, ETFs Attract Net New Money as Dow Posts Another Record Close

Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the fifth consecutive week. They injected $45.4 billion for Refinitiv Lipper’s fund-flows week ended March 10, 2021. Fund investors padded the coffers of money market funds (+$28.9 billion), equity funds (+$14.8 billion), tax-exempt fixed income funds (+$1.1 billion), and taxable bond funds (+$683 million) for the week.

Market Wrap-Up

The broad-based U.S. indices ended the fund-flows week on the plus side as Treasury yields stabilized, nonfarm payrolls came in better-than-expected, and Congress passed the $1.9 trillion COVID-19 relief package.

On the domestic side of the equation, the Russell 2000 Price Only Index (+3.53%) posted the strongest returns of the other broadly followed U.S. indices for the fund-flows week, followed closely by the Dow Jones Industrial Average Price Only Index (+3.28%). The NASDAQ Composite Price Only Index (+0.55%) was the relative laggard. Overseas, the Xetra DAX Total Return Index (+1.75%) posted the strongest returns of the other often-followed broad-based global indices, while the Shanghai Composite Price Only Index (-6.85%) suffered the largest declines.

On Thursday, March 4, 2021, the NASDAQ continued its slide, closing at a three-month low as the tech-heavy index approached correction territory. The 10-year Treasury yield closed the day out at 1.55%, seven basis points (bps) higher than the preceding day. While January U.S. factory orders rose 2.6%, new jobless claims from the week prior rose by 9,000 but were still lower than analyst expectations. Oil futures rose to $63.83 per barrel (bbl) on the day after OPEC confirmed that it will continue its production cuts through April and gold futures continued their decline, settling at $1,700.70 per ounce. U.S. stocks rallied on Friday, February 26, after the Department of Labor reported that the U.S. economy added a better-than-expected 379,000 new jobs in February, beating analysts’ expectations of 210,000 and pushing the unemployment rate to 6.2%. Near-month oil futures continued their ascent, rising to $66.09/bbl, while gold closed down to $1,698.50/oz.

While the Dow closed just shy of the 32,000 mark on Monday, March 8, 2021, the NASDAQ fell into correction territory, declining more than 10% from a recent market peak after investors learned that the Senate passed the $1.9 trillion coronavirus relief package over the weekend. They continued to rotate out of the stay-at-home stocks and bid up energy and financial issues. Nonetheless, on Tuesday, March 9, the NASDAQ booked its largest one-day gain in five months—rising 3.7% on the day—after the 10-year Treasury yield declined four bps from the prior day to 1.55% and near-month crude oil futures lost about 1.6%. Investors appeared to be buying the dip of some of the recently beaten down technology issues. On Wednesday, March 10, the Dow closed at a new record above the 32,000 mark as investors bet on additional market gains from the massive injection of cash after Congress passed the $1.9 trillion spending package, which is expected to be signed into law by President Joe Biden on Friday. The 10-year Treasury yield declined an additional two bps for the day after the February U.S. consumer price index reportedly rose a modest 0.4% for the month, in line with analyst expectations.

Exchange-Traded Equity Funds

Equity ETFs witnessed their fifth consecutive week of net inflows—attracting $12.9 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$10.2 billion), injecting money, for the fourth week in five. Nondomestic equity ETFs witnessed net inflows for the twelfth week running, attracting $2.7 billion this past week. iShares Russell 2000 ETF (IWM, +$1.8 billion) and iShares Core S&P 500 ETF (IVV, +1.3 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Invesco QQQ Trust 1 ETF (QQQ, -$1.7 billion) experienced the largest individual net redemptions, and SPDR Gold ETF (GLD, -$1.2 billion) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the second week in three, taxable fixed income ETFs witnessed net outflows, handing back $2.9 billion this last week. APs were net purchasers of government-Treasury ETFs (+$1.4 billion) and flexible ETFs (+$237 million) while being net redeemers of corporate high-yield ETFs (-$3.9 billion) and international & global debt ETFs (-$936 million). iShares 20+ Year Treasury Bond ETF (TLT, +$671 million) and iShares Core Total USD Bond ETF (IUSB, +$555 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, -$2.1 billion) and iShares JPM USD Emerging Markets Bond ETF (EMB, -$964 million) handed back the largest individual net redemptions for the week. For the second week in a row, municipal bond ETFs witnessed net inflows, taking in $232 million.

Conventional Equity Funds

Conventional fund (ex-ETF) investors were net purchasers of equity funds for the third week in four, injecting $1.9 billion this week, with the macro-group posting a 0.89% market gain for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly more than $619 million, witnessed their eleventh weekly net outflows while experiencing a 1.55% gain on average for the fund-flows week. Nondomestic equity funds—posting a 0.54% weekly loss on average—witnessed their fifth consecutive week of net inflows, taking in $2.5 billion this past week. On the domestic equity side, fund investors shunned large-cap funds (-$1.8 billion) but directed money toward small-cap funds (+$628 million) and equity income funds (+$422 million). Investors on the nondomestic equity side were net purchasers of international equity funds (+$2.0 billion) and global equity funds (+$559 million).

Conventional Fixed Income Funds

For the twelfth week in a row, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $3.6 billion this past week—while posting a 0.08% return for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$3.2 billion), flexible funds (+$1.1 billion), and government-Treasury funds (+$550 million) while being net redeemers of corporate high-yield funds (-$1.5 billion) and balanced funds (-$218 million). The municipal bond funds group posted a 0.46% gain on average during the week and witnessed its seventeenth week of net inflows in 18, attracting $861 million this week. High Yield Municipal Debt Funds (+$418 million) experienced the largest net inflows of the group.

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