August 20, 2021

U.S. Weekly FundFlows Insight Report: Despite Market Declines, Equity ETFs Attract Their Largest Weekly Net Inflows Since March 24

by Tom Roseen.

Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the fourth consecutive week, injecting a net $33.0 billion for Refinitiv Lipper’s fund-flows week ended August 18, 2021. Fund investors were net purchasers of equity funds (+$13.9 billion), money market funds (+$11.3 billion), taxable bond funds (+$5.9 billion), and tax-exempt fixed income funds (+$1.8 billion) for the week.

Market Wrap-Up

The U.S. broad-based indices started the fund-flows week on a bang but ended on a down note as investors weighed better-than-expected first-time jobless claims and a slight decline in consumer prices against the rising cases of the delta variant of the coronavirus, mixed economic news, and the Federal Reserve meeting minutes that showed the Federal Reserve Board might begin tapering its bond purchases later this year.

During the first three trading days of the fund-flows week, the Dow and S&P 500 posted record closing highs (both stringing together five consecutive sessions of record closes) before succumbing to their worst daily percentage drop since July 19 on Wednesday, August 18. On the domestic side of the equation, the S&P 500 Price Only Index (-1.07%) did the best job mitigating losses of the other broadly followed U.S. indices for the fund-flows week. It was followed by the Dow Jones Industrial Average Price Only Index (-1.48%). The Russell 2000 Price Only Index (-4.07%) witnessed the largest declines for the week. Overseas, the Xetra DAX Total Return Index (+0.65%) experienced the only positive returns of the often-followed broad-based international indices, while the FTSE 100 Price Only Index (-1.49%) was the relative laggard.

On Thursday, August 12, 2021, Dow and S&P 500 posted record closing highs, marking the first time both indices closed at new records for three consecutive days since March 15 after first-time jobless claims came in at 375,000 for the prior week, in line with analysts’ estimates, and while the consumer price index increased 5.4% from a year ago, it eased slightly and was lower than some predicted.

Stocks continued their ascent on Friday, August 13, with the Dow and S&P 500 ending at records after choppy trade early in the day after the University of Michigan reported consumer sentiment fell sharply to 70.2 in August from 81.2 in July (its lowest level since April 2020). The decline was attributed to investors’ increasing worries about the impact on economic growth caused by the spread of the delta variant of the coronavirus. Value-oriented trades kept the indices on the plus-side after the U.S. Senate passed a $1 trillion infrastructure plan earlier in the week, increasing the likelihood of it being passed by the House of Representatives. Near-month crude oil prices closed the day down 0.9% to $68.44 per barrel (bbl).

Once again, the Dow and S&P 500 finished the day at record highs on Monday, August 16, as investors shook off earlier losses in the day caused by the news of the Afghanistan turmoil over the weekend and reports that showed a slower-than-expected rise in Chinese retail sales, industrial production, and fixed-asset investments. Investors bid up defensive issues, such as consumer staples, healthcare issues, and utilities. The yield on the 10-year Treasury note declined three basis points to 1.26% and oil closed down 1.7% to $67.29/bbl. The Dow and S&P 500 suffered their first daily losses in five on Tuesday, August 17, after investors learned that July U.S. retail sales fell 1.1%, worse than the 0.3% drop expected by analysts. Despite learning that U.S. industrial production rose 0.9% in July, investors appeared to focus on the growing spread of the delta variant of COVID-19 and the increasing likelihood that the Federal Reserve Board will begin tapering its bond purchases sooner than expected. Near-month crude oil prices declined for a fourth day in row, settling at $66.59/bbl.

On Wednesday, August 18, the Dow and S&P 500 booked their largest daily declines in a month (both about 1.1% for the day) after the Federal Reserve’s July policy meeting minutes showed plans to consider reducing its monetary support, possibly tapering the central bank’s monthly asset purchases by year end. Next week, all eyes will be on the Fed’s annual Economic Policy Symposium in Jackson Hole, at which some feel the Fed may provide some clues on its future interest rate and bond purchase plans.

Exchange-Traded Equity Funds

Equity ETFs witnessed their fourth week of net inflows—attracting $14.1 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$13.2 billion), injecting money also for the fourth week in a row. For the eighth week in a row, nondomestic equity ETFs witnessed net inflows, attracting $944 million this past week. SPDR S&P 500 ETF (SPY, +$8.2 billion) and Invesco S&P 500 Low Volatility ETF (SPLV, +$1.3 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Consumer Staples Select Sector SPDR Fund (XLP, -$493 million) experienced the largest individual net redemptions, and SPDR Gold Trust (GLD, -$484 million) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the fourth week in a row, taxable fixed income ETFs witnessed net inflows, taking in $2.2 billion this last week. APs were net purchasers of corporate investment-grade debt ETFs (+$2.1 billion), flexible ETFs (+$295 million), and international & global debt ETFs (+$126 million) while being net redeemers of corporate high yield ETFs (-$231 million) and government-mortgage ETFs (-$137 million). iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, +$1.1 billion) and iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB, +$243 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares Broad USD High Yield Corporate Bond ETF (USHY, -$317 million) and Invesco Senior Loan ETF (BKLN, -$217 million) handed back the largest individual net redemptions for the week. For the twenty-fifth week in a row, municipal bond ETFs witnessed net inflows, taking in $360 million this week. iShares National Municipal Bond ETF (MUB, +$117 million) witnessed the largest draw of net new money of the municipal bond ETFs in the subgroup for the week.

Conventional Equity Funds

Conventional fund (ex-ETF) investors were net redeemers of equity funds for the eighth consecutive week—withdrawing $214 million this week—with the macro-group recording a 1.57% market decline for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly less than $2.0 billion, witnessed their eighth consecutive weekly net outflows while experiencing a 1.53% loss on average for the fund-flows week. Nondomestic equity funds—posting a 1.66% weekly drop on average—observed their seventh consecutive week of net inflows, taking in $1.8 billion this past week. On the domestic equity side, fund investors shunned large-cap funds (-$1.4 billion) and small-cap funds (-$871 million). Investors on the nondomestic equity side were net purchasers of international equity funds (+$1.9 billion), while being net redeemers of global equity funds, handing back some $152 million.

Conventional Fixed Income Funds

For the second week in a row, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $3.7 billion this past week—while posting a 0.13% loss for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$2.2 billion), flexible funds (+$1.2 billion), and government-Treasury funds (+$255 million) while being net redeemers of international & global debt funds (-$241 million). The municipal bond funds group posted a 0.10% loss on average during the week and witnessed its twentieth straight week of net inflows, attracting $1.5 billion this week. Intermediate Municipal Debt Funds (+$404 million) experienced the largest net inflows of the group, followed by High Yield Municipal Debt Funds (+$402 million).

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