by Jack Fischer.
During Refinitiv Lipper’s fund-flows week ended June 30, 2021, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the third week in a row, withdrawing $3.3 billion.
Money market funds (-$17.5 billion) were the main driver yet again in total weekly outflows, while taxable bond funds (+$7.3 billion), equity funds (+$6.0 billion), and tax-exempt bond funds (+$832 million) all attracted new money.
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based indices traded slightly positive. For the first time in the last four weeks, the DJIA (+1.85%), NASDAQ (+1.63%), S&P 500 (+1.31%), and Russell 2000 (+0.31%) all recorded positive weekly performance. The 10-two Treasury yield spread fell 2.45% on the week. Overseas indices each logged another week of negative performance—FTSE 100 (-2.48%), Nikkei 225 (-0.46%), and DAX 30 (-0.27%). The United States Dollar Index (DXY) rose 0.69%, while the VIX fell by 3.10% over the week.
Thursday, June 24, started our fund-flows week with U.S. equity markets trading positive on the news that a bipartisan deal had been reached over a new infrastructure bill. For this new spending plan to pass, it appears President Joe Biden’s climate change, social programs, and health care spending items were removed and will have to be presented separately. This new bill calls for nearly $500 billion toward revamping and updating bridges, roads, and other infrastructure projects. The Russell 2000 (+1.31%) and the DJIA (+0.95%) were the big winners on the day. The U.S. 30-year fixed-rate mortgage average rose 3.07% from last Thursday. After markets closed, the Federal Reserve Board released its annual bank stress test results. The results were positive, according to Vice Chair for Supervision Randal K. Quarles. “Over the past year, the Federal Reserve has run three stress tests with several different hypothetical recessions and all have confirmed that the banking system is strongly positioned to support the ongoing recovery,” he said. Following the successful test, the Fed removed capital restrictions that were placed on banks during the peak of the pandemic.
On Friday, June 25, equity markets finished quietly in the black. The reopening trade reappeared following a successful bank stress test and future infrastructure spending. The DJIA (+0.69%) and S&P 500 Value (+0.74%) led the way, with only the NASDAQ (-0.06%) ending in the red. Surprisingly, volatility remained subdued as the VIX ended the day at 15.62. Markets did not seem phased by the Personal Income and Outlays report indicating a 3.4% year-over-year increase in the core Personal Consumption Expenditures (PCE) index. The 3.4% PCE increase was the largest since April 1992. The report also highlighted personal income decreasing by 2.0% in May following a 13.1% decrease in April. Bond markets saw a sell-off on the long end of the Treasury yield curve, with the 10-year and 30-year Treasury yields rising more than 3.3%.
Monday saw the NASDAQ (+0.98%) and S&P 500 (+0.23%) each close the day at new record highs. Treasury yields decreased across the board as investors piled into government debt, reversing Friday’s sell-off. Crude oil futures dropped 2.0% to their lowest levels in more than a week. Meanwhile, the United States Dollar Index (DXY) rose 0.22%. On Tuesday, June 29, S&P Dow Jones Indices posted its latest measure for U.S. home prices (S&P CoreLogic Case-Shiller Indices). The data reported a 14.6% annual increase in April, which was up from a 13.3% increase in February. Phoenix (+22.3%), San Diego (+21.6%), and Seattle (+20.2%) led their 20-City Composite in year-over-year gains. Tuesday also saw the release of the Consumer Confidence Survey. Lynn Franco, senior director of economic indicators at The Conference Board, said, “Consumer confidence increased in June and is currently at its highest level since the onset of the pandemic’s first surge in March 2020.” The index improved for the fifth straight month and now stands at 127.3. Despite a resilient equity market, the fixed income world is finding returns hard to come by— the ICE Bank of America U.S. High Yield Index Option-Adjusted Spread ended the day at 3.04%, marking its lowest point since 2007.
Wednesday, June 30, was another win for the reopening trade—DJIA (+0.61%) and S&P 500 Value (+0.43%) each had positive performing sessions. The DXY had its largest daily gain of the week (+0.42%), while the 10-two Treasury yield spread fell 2.69%. ADP published its June National Employment Report that showed an increase of 692,000 private-sector jobs from May. Leisure/hospitality was the largest gainer, adding 332,000 positions during the month. “While payrolls are still nearly seven million short of pre-COVID-19 levels, job gains have totaled about three million since the beginning of 2021,” said Nela Richardson, ADP’s chief economist. “Service providers—the hardest hit sector—continue to do the heavy lifting, with leisure and hospitality posting the strongest gain as businesses begin to reopen to full capacity across the country.”
Exchange-traded equity funds recorded $10.4 billion in weekly net inflows. This is the macro-group’s third weekly inflow in the last four. After returning positive 1.01%, on average, over the last week, equity ETFs posted their largest weekly inflows in seven weeks.
Growth/value large-cap ETFs (+$9.8 billion) and sector-technology ETFs (+$924 million) were the two largest attractors of flows in the equity ETF universe. Growth/value large-cap ETFs have recorded three straight weeks of inflows and pulled in their largest weekly total in 14 weeks. Sector-technology ETFs now have back-to-back weeks of inflows after posting eight of nine weeks of weekly outflows.
On the flip side, we see the same two culprits from last week. Sector-other ETFs (-$1.5 billion) and sector-financial/banking ETFs (-$697 million) suffered the largest subgroup outflows for the week. Sector-other ETFs have now realized consecutive weeks of outflows each of more than $1.4 billion, ending their 12-week streak of inflows. Despite a positive stress test report card from the Fed, sector-financial/banking ETFs logged their third straight week of outflows. Check out last week’s review on if the reflation trade was slowing.
Over the past fund-flows week, the two-top equity ETFs in weekly inflows were SPDR S&P 500 ETF (SPY, +$3.9 billion) and Invesco QQQ Trust 1 (QQQ, +$2.8 billion). Meanwhile, the two equity ETFs which reported the largest outflows were Financial Select Sector SPDR ETF (XLF, -$850 million) and SPDR S&P 400 Mid-Cap Value (MDYV, -$679 million).
Exchange-Traded Fixed Income Funds
Exchange-traded fixed income funds attracted $7.6 billion—the macro-group’s eighth straight week of positive flows and its ninth largest inflow to date. Fixed income ETFs have reported a weekly return of positive 0.20% on average.
Corporate-investment grade ETFs (+$3.1 billion) and government-Treasury ETFs (+$1.7 billion) had the largest weekly inflows under the fixed income ETF macro-group. While reporting a weekly return of positive 0.22%, corporate-investment grade ETFs took in their largest weekly inflows in 11 weeks. Government-Treasury ETFs recorded their eighth consecutive week of net inflows and their third largest inflows of the year. All subgroups in the fixed-income ETF macro-group reported inflows.
iShares iBoxx $High Yield Corporate ETF (HYG, +$756 million) and iShares iBoxx $Investment Grade ETF (LQD, +$698 million) attracted the largest amounts of net new money under the macro-group. On the other hand, 0-5 Year High Yield Corporate Bond Index ETF (HYS, -$30 million) and Invesco 1-30 Laddered Treasury (PLW, -$26 million) suffered the largest net weekly outflows.
Conventional equity funds (ex-ETFs) were net redeemers for the twelfth time in 13 weeks (-$4.4 billion). Conventional equity funds posted a weekly return of positive 0.80% on average—their seventh straight week of positive performance.
Domestic equity funds saw outflows this week (-$3.0 billion), marking the fifty-third week of outflows in the last 55. Nondomestic equities also witnessed a weekly outflow (-$1.4 billion)—their largest outflow in nine weeks.
Conventional sector-other (+$106 million) and sector-technology funds (+$63 million) attracted the largest weekly inflows under the macro-group. Growth/value large-cap funds (-$2.3 billion) and global equity funds (-$915 million) saw the most money exit over the week.
Conventional fixed income funds realized $271 million in weekly outflows—their first week of outflows in six. The week marks the third weekly outflow of the year for the macro-group, even though their weekly performance was 0.37% on average.
Corporate high-yield funds (ex-ETF) suffered the largest weekly outflows of the macro-group (-$750 million)—marking the subgroup’s sixth week of outflows over the previous seven. Corporate high-quality funds saw the second largest outflows, with $256 million leaving their funds.
Conventional fixed income funds were led again by the flexible funds subgroup (+$447 million), recognizing their eleventh straight week of inflows. Corporate investment-grade funds followed with $321 million in weekly net inflows—their sixty-third consecutive week of inflows.
Municipal bond funds (ex-ETFs) returned positive 0.24%, on average, over the fund-flows week and took in $647 million—their thirteenth week in a row of net inflows. The subgroup has reported positive performance for 11 of the last 13 weeks. Municipal bond funds have only recorded two total weeks of net redemptions this year.
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