by Jack Fischer.
During Refinitiv Lipper’s fund-flows week ended March 30, 2022, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the second straight week, adding a net $31.5 billion to the market.
Money market funds (+$29.8 billion) and equity funds (+$3.8 billion) attracted new capital, while taxable bond funds (-$117 million) and tax-exempt bonds (-$2.0 billion) suffered weekly outflows.
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices recorded positive weekly performance—Nasdaq (+3.73%), S&P 500 (+3.28%), DJIA (+2.53%), and Russell 2000 (+1.89%).
Fixed income indices struggled once again, both the Bloomberg U.S. Aggregate Bond Index (-0.18%) and Bloomberg Municipal Bond Index (-0.85%) realized their fourth consecutive negative weekly performance.
For the most part, overseas broad market indices traded positive—the DAX 30 (+3.77%), FTSE 100 (+1.29%), Shanghai Composite (+0.19%), and Nikkei 225 (-0.84%).
A flat yield curve has become inverted. The three-year Treasury yield (2.50%) has topped the 30-year Treasury yield (2.48%). The 10-two Treasury yield spread fell significantly on the week (-85.58%) to 0.03.
As of March 24, the U.S. 30-year fixed-rate mortgage average rose to 4.42%—a 6.25% increase from the prior week. Both the United States Dollar Index (DXY, -0.84%) and VIX (-21.93%) decreased over the week.
Our fund-flows week kicked off Thursday, March 24, with the Department of Labor (DOL) reporting jobless claims for the week fell to their lowest totals since 1969. U.S. equity markets bounced back from Wednesday’s losses, led by the tech-heavy Nasdaq (+1.93%). Also helping growth issues was Congress’ $52 billion CHIPS Act, which would help support building U.S.-based semiconductor foundries. On the geopolitical front, the U.S. and its allies have expanded sanctions to members of the Russian parliament as well as the CEO of the country’s largest bank. The U.S. also signaled gold-related transactions may be next.
On Friday, March 25, U.S. broad-based equity markets ended the day in the black, this time led by the S&P 500 (+0.51%). Shorter-dated Treasury yields spiked—the two- and three-year Treasury yields rose by more than 8%—as Bank of America is now predicting two 0.50% hikes in the coming June and July Federal Reserve meetings. The pain is being immediately felt in the real estate market. The National Association of Realtors (NAR) reported that pending home sales have fallen 4.1% from January and are down 5.4% from last year. NAR chief economist Lawrence Yun said that home buyers are having to deal with a 28% rise in mortgage payments from last year.
Monday, March 28, marked the first time since 2006 that the five-year Treasury yield exceeded the yield on the 30-year. The 10-two Treasury yield spread fell 30.41% on the day. Equity markets finished the day positive—Nasdaq (+1.31%), S&P 500 (+0.71%), and DJIA (+0.27%). Oil futures dropped more than 9% to $103 per barrel.
On Tuesday, March 29, equity markets extended their streak to four straight sessions—Russell 2000 (+2.65%), Nasdaq (+1.84%), S&P 500 (+1.23%), and DJIA (+0.97%). The 10-year Treasury yield fell 3.11% as the 10-two spread fell another 63.70%, its largest daily fall in more than a year. The Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS) reported that employee quits increased by 94,000 to 4.35 million—the third-largest total on record. Back to real estate, the S&P CoreLogic Case-Shiller Home Price Index registered a 12-month gain of 19.2% in January, the fourth-highest increase to date. Geopolitically, Russia announced that it has decided to “dramatically” scale back operations near Kyiv after a session of peace talks held in Istanbul.
Our fund-flows week wrapped up Wednesday, March 30, with U.S. broad-based equity markets ending their four-day hot streak—Russell 2000 (-1.94%) and Nasdaq (-1.21%) were the largest detractors on the day. ADP reported the private sector added 455,000 jobs in March, led by 161,000 in leisure and hospitality. News from the White House suggests a plan to release around 180 million barrels of oil from reserves is imminent. This would be the largest release since the stockpile was created in 1975. According to AAA, the national average for a gallon of gas is $4.23, but states like Illinois and California are closer to $6 than they are to $4.
Exchange-traded equity funds recorded $7.7 billion in weekly net inflows, marking their eighth consecutive week of inflows. The macro-group posted their largest four-week flow moving average of the year while realizing a positive 2.69% on the week.
Growth/value large-cap ETFs (+$4.9 billion), international equity ETFs (+$2.7 billion), and equity income ETFs (+$1.2 billion) were the largest equity ETF subgroups to post inflows this week. Growth/value large-cap ETFs reported their eighth straight week of positive net flows as they logged a positive 3.53% on average. International equity ETFs have only suffered two weekly outflows over the past 15 weeks.
Sector-energy ETFs (-$1.3 billion), growth/value-small cap ETFs (-$642 million), global equity ETFs (-$442 million), and sector-real estate ETFs (-$393 million) were the top flow detractors under the macro-group. Geopolitical uncertainty and Russian sanctions have caused a large gap in imports of barrels of oil per day. Even with the U.S. planning to release more than one million from reserves, we may still be short another three to four million barrels per day from pre-invasion levels. Sector-energy ETFs logged their second-largest outflows on record.
Over the past fund-flows week, the top two equity ETF flow attractors were SPDR S&P 500 ETF (SPY, +$2.3 billion) and iShares: Core MSCI Emerging Markets ETF (IEMG, +$1.2 billion).
Meanwhile, the bottom two equity ETFs in terms of weekly outflows were iShares: Russell 2000 ETF (IWM, -$965 million) and SPDR S&P Oil & Gas Exploration & Production ETF (XOP, -$941 million).
Exchange-traded fixed income funds observed $3.9 billion in weekly net inflows—the macro-group’s sixth consecutive week of inflows. Fixed income ETFs reported a weekly return of negative 0.06% on average—the macro-group’s fourth straight week of sub-zero performance.
Government-Treasury ETFs (+$2.5 billion), corporate-high yield ETFs (+$1.4 billion), and corporate-investment grade ETFs (+$561 million) were the top attractors of capital under fixed income ETFs. Government-Treasury ETFs have observed weekly inflows for 10 of the past 11 weeks. Despite realizing negative performance on the week (-0.50%), the subgroup has posted its fifth consecutive week with a four-week flow moving average above $1.6 billion.
International & Global Debt ETFs (-$644 million), government-mortgage ETFs (-$265 million), and government-Treasury & mortgage ETFs (-$9 million) witnessed the only outflows under the fixed income ETF macro-group. International and global debt ETFs suffered their first weekly outflow in four weeks.
iShares: Short Treasury Bond ETF (SHV, +$703 million), SPDR Bloomberg High Yield Bond ETF (JNK, +$677 million), and Schwab Intermediate-Term US Treasury ETF (SCHR, +$663 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: iBoxx $Investment Grade Corporates ETF (LQD, -$1.1 billion), iShares: JPM USD Emerging Markets Bond ETF (EMB, -$700 million), and iShares: 3-7 Treasury Bond ETF (IEI, -$378 million) suffered the largest net weekly outflows.
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$3.9 billion) for the eighth straight week. Conventional equity funds posted a weekly return of a positive 2.63% on average.
Growth/value large-cap funds (-$2.6 billion), growth/value small-cap funds (-$1.5 billion), international equity funds (-$1.3 billion), global equity (-$309 million), and sector-technology funds (-$134 million) were the largest subgroup outflows under conventional equity funds. International equity funds have observed five straight weeks of outflows, whereas global funds have seen outflows in eight straight weeks.
Growth/value-aggressive funds (+$1.9 billion), sector-other funds (+$118 million), and sector-energy (+$64 million) were the largest attractors of capital over this fund-flows week. This week marks the ninth-largest weekly intake for growth/value-aggressive funds. The subgroup has only posted two weeks of net inflows in the last 52.
Conventional fixed income funds realized a weekly outflow of $4.0 billion—marking their tenth straight week of outflows. The subgroup has produced a negative four-week flow moving average of at least $1.3 billion in nine consecutive weeks. The macro-group realized a positive 0.48% on average—their second straight week of plus-side performance.
Corporate-investment grade (-$3.1 billion), international & global debt (-$240 million), and flexible funds (-$212 million) led the macro-group in outflows. Conventional corporate-investment grade funds have now suffered seven consecutive weeks of outflows. International & global debt has logged 12 straight weeks of net outflows.
For the second week in three, the only subgroup to attract new money under fixed income conventional funds was government-Treasury (+$179 million). This subgroup has logged four straight weeks of inflows despite realizing a negative performance in two of the last three.
Municipal bond funds (ex-ETFs) returned a negative 0.69% over the fund-flows week—their fourth negative weekly performance in a row. The subgroup experienced $2.4 billion in outflows, marking their twelfth week in a row of outflows. The subgroup has logged nine straight weeks with a four-week moving outflow average of greater than $1.1 billion. Conventional municipal bond funds only recorded five total weeks of net outflows in all of 2021.
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