During Refinitiv Lipper’s fund-flows week ended January 5, 2022, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the third straight week, adding $13.4 billion.
Equity funds (+$9.2 billion), taxable bond funds (+$5.4 billion), and tax-exempt bond funds (+$841 million) all attracted new money for the week. Money market funds suffered outflows of $2.1 billion.
Index Performance
At the close of Refinitiv Lipper’s first fund-flows week of 2022, U.S. broad-based indices traded down with the NASDAQ (-4.22%), Russell 2000 (-2.46%), S&P 500 (-1.93%), and DJIA (-0.22%) each logging negative weekly returns.
Overseas broad market indices fared much better, the DAX 30 (+2.52%), FTSE 100 (+1.90%), and Nikkei 225 (+0.72%) all returned plus-side performance.
Rates/Yields
Longer-dated Treasury yields rose over the week—the two-,three-, five-, seven-, and 10-year Treasury yields each climbed over 10%.
The overall Treasury yield curve has flattened dramatically since a year ago—the two- and five-year Treasury yields are up 574.8% and 280.11%, respectively.
The U.S. 30-year fixed-rate mortgage average ticked up to 3.11%, a 1.97% increase from last week. Both the United States Dollar Index (DXY, +0.25%) and VIX (+15.58%) increased over the week.
Market Recap
Our fund-flows week kicked off Thursday, December 30, with U.S. equity markets starting in the green but falling slightly to end the day—S&P 500 (-0.30%), DJIA (-0.25%), NASDAQ (-0.16%), and Russell 2000 (-0.02%). Going into the holidays, investors were worried about the more than 1.44 million infections worldwide of the highly infectious Omicron COVID-19 variant. Airlines canceled thousands of flights. The Department of Labor’s (DOL) first-time unemployment filings reported 198,000 claims (versus the expected 206,000)—the four-week moving average of claims was the lowest reported total in 52 years.
On the last trading session of 2021, U.S. equity markets closed lower for the second straight day. The NASDAQ (-0.61%) was the laggard of the U.S. broad-based indices. Treasury yields also fell for the second consecutive session—the five- (-1.26%) and 30-year (-1.87%) Treasury yields dropped by the largest percentage on the day. The price of oil also declined, West Texas Intermediate (WTI) fell to $75.52 a barrel (-1.90%).
On Monday, the first trading day of 2022, Treasury markets suffered a selloff as yields rose all along the curve—the 10- and 30-year Treasury yields rose by 8.81% and 6.78% respectively. The 10-two Treasury yield spread increased by 10.18%, marking its largest daily spike in more than one year. The “January Effect”—the equity market’s supposed monthly bump due to end-of-year tax-loss harvesting—seems to have gotten the year off on the right foot. The Russell 2000 (+1.21%), NASDAQ (+1.20%), DJIA (+0.68%), and S&P 500 (+0.64%) all ended the session in the black—both the DJIA and S&P 500 touched new record highs.
Tuesday, January 4, saw longer-dated Treasury yields rise once again, hurting many technology issues—NASDAQ (-1.33%) finished the day in the red. The DJIA, however, set a record for the second consecutive day after gaining 0.59%. Tuesday also saw the publication of the DOL’s JOLTS report. The report highlighted there were roughly 1.5 million job openings for each unemployed person—10.6 million openings versus the 6.9 million unemployed.
Our fund-flows week wrapped up Wednesday, January 5, with the Federal Reserve meeting minutes showing the Fed is considering increasing interest rates sooner than expected—the 10-year Treasury yield jumped for the third straight day and touched its highest level since May. The NASDAQ fell 3.34%, marking its worst daily session since February. The Mortgage Bankers Association (MBA) reported mortgage application volume fell 2.7% from the week ending December 17 as both applications and refinancing appear to be slowing.
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $12.6 billion in weekly net inflows, marking their thirteenth week of inflows in the last 14. Equity ETFs posted a negative 1.62%, on average, over the week.
Growth/value large-cap ETFs (+$7.6 billion), equity income funds ETFs (+$1.1 billion), sector-financial/banking ETFs (+$1.1 billion), and sector energy ETFs (+$1.1 billion) were the top attractors of new money over the previous fund-flows week. Growth/value large-cap ETFs and sector-financial/banking ETFs each posted their second consecutive week of inflows. Sector-energy ETFs logged their largest weekly inflow in 44 weeks.
Growth/value small-cap ETFs (-$973 million), sector-technology ETFs (-$538 million), and growth/value aggressive ETFs (-$31 million) were the only equity ETFs sub-groups to post outflows this week. After realizing their worst weekly performance (-5.51%) since September 9, 2020, sector-technology ETFs observed their fourth weekly outflow in five weeks and third straight.
Over the past fund-flows week, the top three equity ETF flow attractors were SPDR S&P 500 ETF (SPY, +$4.0 billion), iShares: Core S&P 500 (IVV, +$1.0 billion), and Select Sector: Energy SPDR (XLE, +$914 million).
Meanwhile, the bottom three equity ETFs in terms of weekly outflows were iShares: Russell 2000 ETF (IWM, -$1.1 billion), Xtrackers MSCI USA ESG Leaders Equity ETF (USSG,-$586 million), and iShares: Russell 1000 Value ETF (IWD, -$453 million).
Exchange-Traded Fixed Income Funds
Exchange-traded fixed income funds recorded $735 million in weekly net inflows—the macro-group’s third straight week of inflows. Fixed income ETFs reported a weekly return of negative 0.58%, on average—the macro-group’s fourth week of negative performance in five.
Corporate-investment grade ETFs (+$972 million), flexible funds ETFs (+$367 million), and corporate-high yield ETFs (+$307 million) were the top attractors of capital under fixed income ETFs. Despite recording back-to-back weeks of negative performance, both corporate-investment grade ETFs and flexible funds have now logged two straight weeks of inflows. Corporate-high yield ETFs have witnessed three straight weekly inflows for the first time since September.
Government-Treasury ETFs (-$876 million), government-mortgage ETFs (-$93 million), corporate-high quality (-$8 million), and balanced funds ETFs (-$1 million) witnessed the only outflows under the fixed income ETF macro-group. Government- Treasury ETFs suffered their second straight week of negative performance (-0.90%)—their largest weekly drop in 15 weeks. Government-mortgage ETFs realized their eighth weekly outflow over the last 10 weeks.
iShares: iBoxx $High-Yield ETF (HYG, +$761 million), and iShares: TIPS Bond ETF (TIP, +$470 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: 20+ Treasury Bond ETF (TLT, -$1.4 billion) and SPDR Bloomberg High Yield Bond ETF (JNK, -$411 million) suffered the largest net weekly outflows.
Conventional Equity Funds
After realizing their second-largest weekly intake on record, conventional equity funds (ex-ETFs) were net redeemers for the first week in three (-$3.4 billion). Conventional equity funds posted a weekly return of negative 2.22% on average, their first week of sub-zero performance over the last three.
Growth/value large-cap (-$3.7 billion), growth/value aggressive (-$841 million), and growth/value small-cap (-$430 million) were the largest sub-group outflows under conventional equity funds. Both growth/value large-cap and growth/value small-cap conventional funds ended a two-week stretch of inflows this past week. Growth/value aggressive funds have reported outflows in 39 of the last 40 weeks.
International equity (+$2.2 billion), global equity (+$223 million), and sector-financial/banking funds (+$19 million) were the only subgroups to post weekly inflows over $1 million under conventional equity funds. Despite a negative 0.69% return on average, conventional international equity funds logged their tenth weekly inflow over the past 11 weeks. International equity funds have observed back-to-back weekly inflows of more than $2 billion for the first time since August.
Conventional Fixed Income Funds
Conventional fixed income funds realized a weekly inflow of $4.7 billion—putting their four-week moving average back into positive territory for the first time in over a month. The subgroup reported a weekly performance of negative 0.47%, on average.
Conventional corporate-investment grade (+$2.9 billion) and government-Treasury funds (+$916 million) led the macro-group in inflows. Corporate-investment grade funds witnessed their largest weekly inflow since early July, despite two straight weeks of negative performance. Government-Treasury funds have realized 22 straight weeks of inflows while logging their largest intake in 36 weeks.
Government-mortgage (-$282 million) and balanced funds (-$34 million) suffered the largest outflows under conventional fixed income funds. Conventional government-mortgage funds have realized eight consecutive weeks of outflows—on average the sub-group returned negative 0.39% over the past funds-flow week. Conventional balanced funds observed their first weekly outflow in three weeks as they logged a negative 0.88%, on average.
Municipal bond funds (ex-ETFs) returned positive 0.02% over the fund-flows week. The subgroup experienced $595 million in inflows, marking their fifth week in a row of logging inflows. Conventional municipal bond funds only recorded five total weeks of net outflows in 2021.
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