July 29, 2021

U.S. Weekly FundFlows Insight Report: For the First Time in Seven Weeks, Investors are Net Buyers of Fund Assets

by Jack Fischer.

During Refinitiv Lipper’s fund-flows week ended July 28, 2021, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the first week in seven, pumping in $29.0 billion.

Money market funds (+$15.4 billion), equity funds (+$8.2 billion), taxable bond funds (+$3.9 billion), and tax-exempt bond funds (+$1.4 billion) all attracted new money.

Market Wrap-Up

At the close of Refinitiv Lipper’s fund-flows week, small-cap U.S. equities lagged the broader market for the fourth time in the last five weeks. The Russell 2000 (-2.24%) reported its fifth negative performing week in the last seven. The S&P 500 (+0.96%) continued its torrid streak, posting its tenth week in the black over the previous 11. The NASDAQ (+0.89%) and DJIA (+0.38%) appreciated as well. Overseas, the FTSE 100 (+1.69%), DAX (+1.05%), and Nikkei 225 (+0.33%) logged plus-side performance.

During the fund-flows week, the two-10 Treasury yield spread decreased by 2.05%. Tuesday and Wednesday caused most of the movement in the yield curve—the two- (+1.44%) and five-year (+1.23%) Treasury yields increased over the week as the longer-dated yields fell. As of July 22, the U.S. 30-year fixed-rate mortgage average (reported weekly) fell for the third consecutive week. The United States Dollar Index (DXY) fell 0.47%, while the VIX increased 2.13% on the week.

On Thursday, July 22, broad-based U.S. markets traded positive outside the Russell 2000. Ending its two-day run, the small-cap focused index recorded its worst daily performance of the week (-1.55%). Technology and growth issues led the way on Thursday’s volatile session—NASDAQ (+0.36%) and S&P Growth (+0.77%). Treasury yields along the yield curve fell on the day, the two- (-2.88%) and three-(-3.35%) year falling more sharply than longer-dated yields. New jobless claims took an unexpected jump (419,000 vs. the estimated 360,000). The National Association of Realtors (NAR) reported existing-home sales broke a four-month streak of declines in June—increasing 1.4% from May. Existing-home inventory (+3.3%) also increased month over month but is down 18.8% from last June. The publication also stated median prices for all housing were up 23.4% year over year (currently at $363,300). The June year-over-year increase marks the one-hundred-and-twelfth straight month of annual price increases.

Friday, July 23, marked another positive session for U.S. broad-based indices, once again led by technology and growth equities. NASDAQ (+1.04%), S&P 500 (+1.01%), DJIA (+0.68%), and even the Russell 2000 (+0.46%) closed the calendar week on a positive note. Longer-dated Treasury yields increased—the 10- and 30-year rose by 1.42% and 1.10%, respectively. Refinitiv Proprietary Research reported that of the 120 companies in the S&P 500 which have reported earnings for Q2, 88.3% have reported earnings above analyst estimates. The VIX dropped 3.62% on the day.

The new calendar week began on Monday with U.S. equity markets continuing their momentum upward. Despite rising concerns over increasing cases of the Delta COVID-19 variant, the Russell 2000 (+0.33%), S&P 500 (+0.24%), DJIA (+0.24%), and NASDAQ (+0.03%) all ended the session slightly positive. The DJIA and S&P both climbed to new record highs. Treasury yields were quite ahead of this week’s Federal Open Market Committee (FOMC) meeting.

Tuesday, July 27, the Centers for Disease Control and Prevention (CDC) reversed its indoor mask policy, stating that fully vaccinated people should be wearing face coverings again. The recommendation comes after Johns Hopkins University published data showing the weekly average of new daily COVID-19 infections in the U.S. is now more than 57,000—a 65% increase week over week. The U.S. equity markets tumbled as the NASDAQ (-1.21%), Russell 2000 (-1.13%), S&P 500 (-0.47%), and DJIA (-0.24%) all saw daily losses. Tuesday’s rough day for U.S. equities followed a rough couple of days for Chinese stocks. The Shanghai Composite’s weekly return over the fund-flows week was negative 6.06%—the government continues its crackdown on various technology companies.

Our fund-flow week wrapped up Wednesday, July 28, with the FOMC announcing not much has changed in terms of the economic recovery and inflation. They will leave current monetary policies unchanged as there is “more ground to cover.” While maximum employment and target inflation of 2% are still the primary drivers of the FOMC’s policy decisions, the Delta variant’s impact on the economy will continue to be watched. Many anticipate a reduction in the central bank’s asset purchasing program will begin before any interest rate increases. The following statement from the FOMC seems to back that forecast:

“Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings.”

Equity markets reacted mixed—the Russell 2000 (+1.51%) and NASDAQ (+0.70%) ended up, while the S&P 500 (-0.02%) and DJIA (-0.36%) lost ground on the day. A sell-off in the Treasury market caused yields to rise by more than a percentage point along the curve.

Exchange-Traded Equity Funds

Exchange-traded equity funds recorded $9.4 billion in weekly net inflows. This is the macro-group’s second weekly inflows in the last three and their largest inflow over the past month. Equity ETFs returned a positive 0.49% on average.

Growth/value large-cap ETFs (+$5.5 billion), international equity ETFs (+$1.9 billion), and equity income ETFs (+$1.4 billion) were the three largest attractors of new money in the equity ETF macro-group. Growth/value large-cap ETFs bounced back after recording their largest weekly outflows since February. The subgroup has wound up in the top equity ETF spot in four out of the past five weeks. International equity ETFs attracted their largest weekly inflows in seven weeks. Equity income ETFs attracted their largest weekly inflows since May and continued their 24-week streak of net inflows while posting a 0.43% return, on average.

Growth/value small-cap ETFs (-$1.7 billion), gold and natural resources ETFs (-$238 million), and sector-energy ETFs (-$187 million) suffered the largest subgroup outflows for the week. Small-cap equities have taken a beating all month—the Russell 2000 (-3.70%) has lagged all other U.S. broad-based equity indices in month-to-date returns. Gold and natural resources ETFs reported a weekly return of positive 1.27% as they suffered the largest weekly outflows since February. Sector-energy ETFs have realized two consecutive weeks of outflows.

Over the past fund-flows week, four equity ETFs saw weekly inflows of more than $1 billion: Invesco QQQ Trust (QQQ, +$3.0 billion), iShares: ESG A MSCI USA (ESGU, +$1.3 billion), iShares: MSCI EAFE Growth (EFG, +$1.3 billion), and iShares: Global Technology (IXN, +$1.0 billion). Meanwhile, the top three equity ETFs for weekly outflows were iShares: Russell 2000 ETF (IWM, -$1.3 billion), iShares: MSCI USA Momentum Factor (MTUM, -$1.2 billion), and ARK Innovation (ARKK, -$552 million).

Exchange-Traded Fixed Income Funds

Exchange-traded fixed income funds recorded $2.2 billion in weekly net inflows—the macro-group’s eighth week of inflows over the previous 10. Fixed income ETFs reported a weekly return of positive 0.30% on average—their fifth week of positive performance in the last six.

Government-Treasury ETFs (+$1.0 billion) and corporate-high yield ETFs (+918 million) had the largest weekly inflows under the fixed income ETF macro-group. While reporting their sixth straight positive weekly return (+0.63%), government-Treasury ETFs recorded their second consecutive week of net inflows totaling more than $1 billion each. Government-Treasury ETFs have seen nine weeks of positive inflows in their last 10. Corporate-high yield ETFs posted their first positive inflow figure in the last three weeks and the largest inflows in four weeks.

The only two subgroups to record weekly outflows of more than $1 million were corporate-investment grade ETFs (-$164 million) and government-mortgage ETFs (-$155 million). This week’s outflow for corporate-investment grade ETFs marks the third weekly outflow in the last four weeks. The subgroup posted a positive 0.29% weekly return on average. Government-Treasury ETFs also logged their third weekly outflows over the past four weeks.

iShares: TIPS Bond ETF (TIP, +$1.8 billion) and iShares: iBoxx Investment Grade Corporates (LQD, +$1.1 billion) attracted the largest amounts of net new money under the fixed income ETF macro-group. On the other hand, iShares: US Treasury Bond (GOVT, -$1.6 billion) and iShares: 1-5 Investment Grade Corporate Bond (IGSB, -$1.3 billion) suffered the largest net weekly outflows.

Conventional Equity Funds

Conventional equity funds (ex-ETFs) were net redeemers for the fifteenth time in 16 weeks (-$715 million). Conventional equity funds posted a weekly return of positive 0.68% on average—their first week of positive performance over the past three.

Domestic equity funds saw outflows this week (-$1.4 billion), marking the fifty-seventh week of outflows in the last 59. Nondomestic equities attracted a weekly inflow of $650 million—their fourth straight week posting inflows.

Conventional international equity funds (+$865 million) and equity income funds (+$278 million) realized the largest weekly inflows under the macro-group. International equity funds witnessed their fourth straight week of inflows despite posting a return this week of negative 0.16% and having only one positive weekly return in the last four weeks. Equity income funds reported positive weekly performance on average (+0.39%).

Growth/value small-cap funds (-$597 million) and growth/value large-cap funds (-$578 million) saw the most money depart under conventional equity funds. Small caps continue to suffer, growth/value small-cap funds now have hit their largest four-week moving average in terms of outflows (-$796 million) since the first week in January. Growth/value large-cap funds have seen outflows in 56 of their last 57 weeks.

Conventional Fixed Income Funds

Conventional fixed income funds realized a weekly inflow of $1.7 billion—their fifteenth week of inflows in 17, while posting a weekly positive performance of 0.30%, on average.

Conventional flexible funds (+$709 million) led the macro-group, realizing their fifteenth straight week of inflows. Conventional corporate investment-grade funds (+$458 million) also saw weekly inflows—recognizing their sixty-seventh consecutive week of inflows.

Only two conventional fixed income subgroups realized weekly outflows: Government-Treasury & mortgage funds (-$54 million) and corporate-high quality funds (-$13 million). Government-Treasury & mortgage funds posted their third consecutive week of outflows. Corporate-high quality funds suffered their sixth straight week of outflows. Both subgroups recorded positive weekly performance—0.28% and 0.44%, respectively.

Municipal bond funds (ex-ETFs) returned negative 0.02%, on average, over the fund-flows week but still saw inflows ($+911 million)—their seventieth week in a row of net inflows. The subgroup has reported positive performance in 11 of the last 13 weeks. Municipal bond funds have only recorded two total weeks of net redemptions this year.

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