by Tom Roseen.
Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the first week in four, injecting a net $28.4 billion for the Refinitiv Lipper fund-flows week ended April 27. However, the headline numbers are a bit misleading. Fund investors were net purchasers of money market funds (+$40.0 billion) and taxable bond funds (+$19 million) while being net redeemers of equity funds (-$8.8 billion) and tax-exempt fixed income funds (-$2.9 billion) for the week.
Markets tanked during the fund-flows week as investors weighed the implications of aggressive interest hikes by the Federal Reserve, Russia continuing to wage war on Ukraine, prolonged supply chain disruptions, and another COVID-related shutdown in China.
Despite a large one-day market turnaround on Monday, April 25, equities performed poorly during the fund-flows week. On the domestic side of the equation, the Russell 2000 Price Only Index (-7.56% for the week, and down 16.09% YTD) posted the weakest returns of the other broadly followed U.S. indices as investors ducked for cover as market volatility and uncertainty were on the rise. It was bettered by the Nasdaq Composite Price Only Index (-7.17% and -20.17%, respectively). The Dow Jones Industrial Average Price Only Index (-5.29% and -8.36%, respectively) mitigated losses better than the other U.S. indices for the week. Overseas, the Shanghai Composite Price Only Index (-8.13% and –20.99%, respectively) posted the largest declines of the other often-followed broad-based international indices, while the Nikkei 225 Price Only Index (-3.53% and -17.76%, respectively) did the best job mitigating losses.
On Thursday, April 21, the DJIA and S&P 500 posted their sharpest one-day declines in nearly two weeks as bond yields were on the rise and energy, communication, and technology issues took it on the chin. Markets slumped after Federal Reserve Board Chair Jerome Powell gave his support to moving faster on raising interest rates to stave off rising inflation. Powell said, “It is appropriate in my view to be moving a little more quickly,” hinting at a potential 50-basis-point (bps) hike in May. Investors appeared to shrug off a strong beginning to the Q1 earnings season and a report that showed first time claims for unemployment benefits from the week prior declined by 2,000 to 184,000, instead focusing on news that a eurozone rate hike might come as early as July. The 10-year Treasury yield rose five bps, closing at 2.90%.
The Dow witnessed another huge one-day decline on Friday, April 22, falling 981.36 points (or 2.8%) on the day—its largest one-day percentage decline since October 28, 2020, as a fresh batch of corporate earnings generally disappointed. The CBOE Volatility Index (VIX) closed out the day at 27.1, moving above its long-run average of just below 20. In other news, the CME FedWatch Tool indicated that traders of fed funds futures priced in a 94% chance that the Fed will deliver a 75-bps hike in June, up from 70% the day before. Oil prices fell—with front-month crude oil futures declining 1.7%—closing at $102.07/barrel (bbl) and posting a weekly decline of 4.1% on Friday. The 10-year Treasury yield remained unchanged at 2.90%.
The DJIA witnessed its biggest intraday turnaround since February on Monday, April 25, as investors appeared to brush off weakness related to China’s renewed COVID lockdowns and focused on oversold issues. However, the Chinese market, along with commodities prices, were battered after Beijing began testing millions and shut down a few regions amid a rise in infections. Front-month crude oil futures declined 3.5% to settle at $98.54/bbl. The 10-year Treasury yield declined nine bps on the day to close at 2.81%.
All three major U.S. indices ended sharply lower on Tuesday, April 26, with the Nasdaq witnessing its largest one-day percentage decline, falling 514.11 points or 4%, since September 8, 2020, as investors took a wait-and-see approach ahead of earnings announcements scheduled after market close for Microsoft and Alphabet. In other news, U.S. March durable goods orders rose 0.8%, signaling the economy is still growing; however, a survey of consumer confidence declined slightly from 107.6 in March to 107.3 in April. The 10-year Treasury yield fell four bps to 2.77% as some investors became a bit more risk averse, but front-month crude oil futures rose 3.2% to $101.70/bbl.
The Dow and S&P 500 managed to post slight gains, while the Nasdaq continued its slide on Wednesday, April 27, as investors responded to mixed earnings from heavyweights Microsoft and Alphabet. Microsoft reported profit and sales that beat analyst estimates, while Alphabet came in shy of estimates for both. Front-month crude oil futures rose 0.3% to $102.02/bbl after investors weighed the news of Russia halting gas delivery to Bulgaria and Poland because of their inability to pay in rubles. The 10-year Treasury yield rose five bps to 2.82%, while gold for June delivery fell 0.8% to close at $1,888.70—hitting a two-month low.
Exchange-Traded Equity Funds
Equity ETFs witnessed their third consecutive week of net outflows, handing back $1.2 billion for the most recent fund-flows week. Authorized participants (APs) were net sellers of domestic equity ETFs (although only to the tune of -$468 million), withdrawing money also for the third week in a row, while for the first week in six, nondomestic equity ETFs witnessed net outflows, handing back some $733 million this past week. Large-cap ETFs (+$1.9 billion) attracted the largest draw of net new money, followed by the equity income ETFs (+$1.8 billion) and sector-utility ETFs (+$401 million). Meanwhile, sector-financial/banking ETFs (-$2.3 billion) suffered the largest net redemptions of the equity ETF macro-groups for the flows week, followed by mid-cap ETFs (-$955 million) and international ETFs (-$877 million).
SPDR S&P 500 ETF (SPY, +$1.5 billion) and Invesco QQQ Trust 1 ETF (QQQ, +$1.2 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, iShares Core S&P 500 ETF (IVV, -$2.4 billion) experienced the largest individual net redemptions and Financial Select Sector SPDR ETF (XLF, -$1.8 billion) suffered the second largest net redemptions of the week.
Exchange-Traded Fixed Income Funds
For the second week in a row, taxable fixed income ETFs witnessed net inflows, taking in $4.3 billion this last week. APs were net purchasers of government-Treasury ETFs (+$2.9 billion), corporate investment-grade debt ETFs (+$1.8 billion), and international & global debt ETFs (+$362 million), while being net redeemers of flexible ETFs (-$835 million). iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, +$1.1 billion) and Schwab Intermediate-Term US Treasury ETF (SCHR, +$791 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares TIPS Bond ETF (TIP, -$582 million) and iShares Short Treasury Bond ETF (SHV, -$385 million) handed back the largest individual net redemptions for the week.
For the seventh week in eight, municipal bond ETFs witnessed net inflows, with investors injecting $288 million this week. iShares National Muni Bond ETF (MUB, +$852 million) witnessed the largest draw of net new money of the municipal bond ETFs, while SPDR Nuveen Bloomberg Municipal Bond ETF (TFI, -$601 million) experienced the largest net redemptions in the subgroup for the week.
Conventional Equity Funds
Conventional fund (ex-ETF) investors were net sellers of equity funds for the twelfth week in a row—redeeming $7.6 billion—with the macro-group recording a market loss of 6.15% for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly less than $3.1 billion, also witnessed their twelfth consecutive week of net outflows while chalking up a 6.40% market loss on average for the fund-flows week. Nondomestic equity funds—posting a 5.54% weekly decline on average—observed their third straight week of net outflows, handing back $4.5 billion this week.
On the domestic equity side, fund investors were net purchasers of the commodities heavy sector-other funds (+$252 million), while being net redeemers of small-cap funds (-$1.4 billion) and large-cap funds (-$1.0 billion). Investors on the nondomestic equity side were net redeemers of international equity funds (-$4.1 billion) and global equity funds (-$444 million) for the week.
Conventional Fixed Income Funds
For the fourteenth week in a row, taxable bond funds (ex-ETFs) witnessed net outflows—handing back $4.3 billion this past week—while posting a 1.39% loss on average for the fund-flows week. Investors were net purchasers of government-Treasury funds (+$220 million) and balanced funds (+$83 million) while being net redeemers of corporate investment-grade debt funds (-$3.0 billion), international & global debt funds (-$654 million), and corporate high-quality funds (-$492 million).
The municipal bond funds group posted a 0.43% loss on average during the week and witnessed its sixteenth consecutive weekly net outflows, handing back $3.2 billion this week and marking its longest stretch of weekly net outflows since the week ended January 8, 2014. General & Insured Municipal Debt Funds (-$1.1 billion) and High Yield Municipal Debt Funds (-$715 million) experienced the largest net outflows of the group.
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