by Jack Fischer.
During Refinitiv Lipper’s fund-flows week ended May 12, 2021, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the thirteenth week in 15 (+20.1 billion).
Equity funds (+$9.0 billion), money market funds (+$6.1 billion), taxable bond funds (+$5.1 billion), and tax-exempt bond funds (+$750 million) all attracted net inflows over the trailing five trading days.
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based indices each logged their worst performing week in more than five weeks. Russell 2000 (-4.74%), NASDAQ (-4.05%), S&P 500 (-2.51%), and DJIA (-1.88%) all finished deep in the red. Overseas, broad-based global indices Shanghai Composite (+0.92%), FTSE 100 (+0.85%), and DAX 30 (+0.45%) recorded positive performances. The 10-two Treasury yield spread rose 7.23% to 1.53, while the indicator for expected market volatility over the next 30 days (VIX) rose 51.26% to 27.59.
On Thursday, May 6, U.S. equity markets closed the session slightly in the black. DJIA (+0.93%) was the daily winner, while the NASDAQ (+0.37%) ended a four-day losing streak. Positive ADP private sector job data reported April employment increased by 742,000 jobs from March—the largest month-over-month increase in six months. The Department of Labor (DOL) also reported a seasonally adjusted initial jobless claims of 473,000, marking the lowest weekly level since the start of the pandemic. The VIX closed the day at 18.24. Friday was a different story for job data, as investors were floored by the DOL reporting nonfarm payrolls employment only rose by 266,000 in April—drastically missing the forecasted mark of an increase of one million. The unemployment rate (6.1%) rose for the first time since last April as nonfarm employment is still down 8.2 million from pre-pandemic levels. Even with the negative news, U.S. broad-based indices ended the day with positive daily performance. After Treasury Secretary Janet Yellen walked back her recent comments geared towards raising rates, investors appear to be betting that Friday’s weak job data will continue to fuel the Federal Reserve’s accommodative monetary policy. The 10-year Treasury yield rose for the first time in five sessions and the VIX ended the week ended the near 52-week lows at 16.84.
While the corporate earnings season may be slowing down, market uncertainty and inflationary fears appear to be picking up. Monday saw negative performance from U.S. broad-based equity markets, with the small-cap focused Russell 2000 (-2.59%) and tech-heavy NASDAQ (-2.55%) realizing the largest declines. The VIX rose 16.03% as investors start to question the Federal Reserve’s stance on price level increases being “transitory.” Demand surges amid a fuel pipeline shutdown (due to a cyberattack) have led to supply-chain constraints that have many market participants fearing both temporary and permanent price level increases. On Tuesday, U.S. equity markets fell for the second straight day as investors prepared for Wednesday’s CPI data.
Wednesday, March 12, ended our Lipper fund-flows week with CPI data revealing a 4.2% increase compared to expectations of a 3.6% increase—revealing the largest 12-month increase since September 2008. Although the year-over-year number is amplified due to the economy being completely shut down last April, the one-month increase of 0.8% was also greater than estimations. The two largest month-over-month increases from the CPI data were Used Cars and Trucks (+10.0%, its largest monthly increase to date) and Transportation Services (+2.9%). Pair these increases with the leisure and hospitality industry recording the largest hiring gains in the most recent nonfarm payrolls report and we can certainly see an increase in the demand for travel.
U.S. equity markets fell drastically Wednesday following the CPI data. DJIA (-1.99%) and S&P 500 (-2.14%) each posted their lowest daily returns since January and February, respectively. The VIX closed the fund-flows week at 27.59—its third straight day of sharp increases. The 10-two Treasury yield rose by the largest amount since March (+4.44%).
After seeing $11.3 billion in net inflows, exchange-traded equity funds recorded their fourteenth straight week of positive inflows. Despite negative weekly performance on average (-2.41%), the macro-group attracted its largest weekly inflows since March.
The top two sub-groups to attract weekly net inflows were growth/value large-cap ETFs (+$4.5 billion) and international equity ETFs (+$4.0 billion). Growth/value large-cap ETFs have reported back-to-back weekly net inflows, while international equity ETFs have recorded 21 straight weeks of net inflows. Sector financial/banking ETFs witnessed the largest inflow as a percentage of total assets (+$777 million).
Sector technology ETFs and sector real estate ETFs suffered the largest net outflows among the sub-groups (-$756 million and -$677 million, respectively). Coming off its eight largest weekly outflows to date, sector technology ETFs have seen outflows four weeks in a row. Sector real estate ETFs have gone back-to-back weeks with net outflows.
Over the past fund-flows week, there were two equity ETFs which attracted more than $1.0 billion: Invesco QQQ Trust 1 (QQQ, +$1.7 billion) and iShares: Core MSCI EAFE (IEFA, +$1.4 billion). Prior to this week, Invesco QQQ Trust 1 saw three straight weeks of outflows of more than $1.1 billion. iShares: Core S&P 500 (IVW, -$1.1 billion), iShares: Russell 2000 ETF (IWM, -$859 million), and iShares: US Real Estate ETF (IYR, -$842 million) saw the largest net redemptions during the week.
Bouncing back after $1.7 billion in net outflows, exchange-traded fixed income funds drew in $2.6 billion. Fixed income ETFs also had negative performance on average (-0.38%). This marks the macro-group’s sixth week of net inflows over the past seven.
Corporate investment grade ETFs attracted $1.4 billion in weekly net inflows, making them the top sub-group of fixed income ETFs in terms of flows. Following the trend of the macro-group, corporate investment grade ETFs also record their sixth week of net inflows over the past seven. Following closely behind, government-Treasury ETFs logged $1.4 billion in weekly inflows, recording its first week of net subscriptions in three.
Corporate high yield ETFs were the largest detractor of the macro group, reporting $1.1 billion of outflows and their second week in a row seeing outflows of more than $1.0 billion.
iShares: 20+ Treasury Bond ETF (TLT, +$543 million), iShares: TIPS Bond ETF (TIP, +$393 million), and SPDR Portfolio Short Term Treasury (SPTS, +$362 million) pulled the largest amounts of net new money of all individual taxable fixed income ETFs. On the flip side, SPDR Bbg Barclays High Yield Bond (JNK, -$825 million) and iShares:iBoxx $High Yield Corporate (HYG, -$269 million) suffered the largest individual net redemptions.
Conventional equity funds (ex-ETF) were net redeemers for the sixth consecutive week as $2.3 billion flowed out of funds. The macro-group has a four-week moving average of negative $4.5 billion, which is their largest four-week outflows average since February.
Conventional domestic equity funds also saw net redemptions and posted their twentieth straight week of net outflows (-$2.4 billion). Non-domestic equities (ex-ETF) realized a small net inflow of $96 million—its first week of inflows in three.
Growth/value large cap conventional funds returned negative 2.84% on average and observed $2.0 billion in weekly net outflows, making this its forty-sixth straight week of negative flows. Sector technology funds (ex-ETF) saw net outflows as well totaling $577 million—its third consecutive week of net outflows.
Conventional international equity and equity income funds witnessed the top inflows, realizing $515 million and $327 million, respectively. The sub-group to take in the largest percentage of flows compared to its AUM was sector financial/banking conventional funds (+$181 million).
Despite recording its first week of negative performance since March, conventional fixed income funds saw net inflows of $2.5 billion. The macro-group has now witnessed six consecutive weeks of net inflows.
Conventional fixed income funds were led by the flexible funds sub-group (+$1.0 billion), making their fourth straight week of inflows. Conventional balanced funds suffered the largest weekly outflows under the macro-group (-$228 million). Balanced funds (ex-ETF) experienced their first weekly outflows in seven weeks.
Conventional municipal bond funds returned positive 0.03% on average over the fund-flows week and took in $573 million—their sixth week in a row of net inflows. Conventional municipal bond funds have only recorded four total weeks of net redemptions in the past year.
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