During Refinitiv Lipper’s fund-flows week ended June 8, 2022, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the second week in three, pumping in $19.2 billion.
Money market funds (+$24.3 billion) reported weekly inflows, while taxable bond funds (-$2.8 billion), tax-exempt bond funds (-$2.1 billion), and equity funds (-$274 million) suffered outflows.
Index Performance
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices traded positive for the third week straight—Russell 2000 (+1.95%), Nasdaq (+0.77%), S&P 500 (+0.35%), and DJIA (+0.30%).
Fixed income indices traded down with the Bloomberg Municipal Bond Total Return Index and the Bloomberg U.S. Aggregate Bond Total Return Index falling 0.36% and 0.68%, respectively.
Overseas broad market indices traded mostly positive for the fourth straight week—Shanghai Composite (+2.74%), Dax 30 (+1.34%), FTSE 100 (+1.24%), and Nikkei 225 (-0.17%).
Rates/Yields
The 10-two Treasury yield spread fell over the week (-4.49%). Treasury yields along the yield curve increased for the second consecutive week—the two- (+4.13%), five- (+3.13%), 10- (+3.34%), and 30-year (+3.31%).
The Mortgage Bankers Association reported the 30-year fixed-rate average increased for the first time in four weeks to 5.40%. The United States Dollar Index (DXY, +0.04 %) appreciated as the VIX (-7.22%) decreased over the course of the week.
Market Recap
Our fund-flows week kicked off Thursday, June 2, with U.S. broad-based equity markets ending a two-day slide—Nasdaq (+2.69%), Russell 2000 (+2.31%), S&P 500 (+1.84%), and DJIA (+1.33%). Investors bought into Treasuries as the ADP National Employment Report showed a tightening in the labor market. The report highlighted that only 128,000 private sector jobs were created in May—nearly half of what experts were forecasted and a 202,000 decrease from April. This marks the third straight month-over-month decrease in private sector job growth. Relator.com reported that houses listed for sale increased in May for the first time in nearly three years, showing that supply in the real estate market may finally be growing. The company also reported that the median listing price for active listings was $447,000—an all-time high and a 17.6% spike from 12 months ago.
U.S. equity indices ended the week on June 3 with a contradictory U.S. jobs report. The Department of Labor reported that nonfarm payrolls showed a 390,000 increase in May—65,000 above economists’ estimates. The report also stated the average hourly earnings increased another $0.10 to a level 5.2% higher than last year. A strong jobs report leads many market participants to believe that the Federal Reserve will not hold back on its plan to increase interest rates, leading to a selloff in both the fixed income and equity markets. Nasdaq fell 2.47% as the 10-year Treasury yield increased 1.37%.
On Monday, June 6, U.S. equity markets traded slightly positive—Nasdaq (+0.40%), Russell 2000 (+0.36%), S&P 500 (+0.31%), and DJIA (+0.05%). Treasury yields spiked as yields along the curve rose by more than 2.50%. In an effort to incentivize solar panel production, President Joe Biden enabled emergency federal powers by putting a two-year freeze on tariffs of parts critical to solar panel manufacturing. Biden also called upon the Department of Energy to help U.S. firms in becoming both greener and more energy efficient. Just last week, West Texas Intermediate (WIT) crude rose to $120 per barrel, marking the sixth consecutive week of oil price increases. The gain in oil prices came on the news that the European Union will ban up to 90% of Russian oil imports.
On Tuesday, June 7, U.S. equity markets advanced for the second straight session, led by the small-cap-focused Russell 2000 (+1.57%). Royal Bank of Canada (RBC) recently slashed its year-end estimate for the S&P 500 as they become the latest big bank to forecast an economic slowdown. RBC did not predict a recession, however, they stated that small-cap stocks were looking better on valuation and sentiment. Treasury Secretary Janet Yellen testified in front of a Senate committee that her previous assessment that inflation would be “transitory” was wrong. Yellen stated that the U.S. faces “unacceptable levels of inflation.” She warned that annual inflation rate estimates are now 4.7% and are “likely to be higher.” The 10-year Treasury yield fell 2.24% on the day.
Our fund-flows week wrapped up Wednesday, June 8, with U.S. equity markets ending their two-day rally—Russell 2000 (-1.49%), S&P 500 (-1.08%), DJIA (-0.81%), and Nasdaq (-0.73%). Treasury yields increased on the day led by the 10-year (+1.99%). Oil futures increase to as high as $123 per barrel. OPEC+ did agree last week to increase oil production but many experts believe the move is only a small drop in the bucket. The World Bank downgraded its 2022 global growth estimate to 2.9%—the bank originally forecasted a 4.1% increase back in January. World Bank President David Malpass said,
“For many countries, a recession will be hard to avoid…Markets look forward, so it is urgent to encourage production and avoid trade restrictions.”
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $4.8 billion in weekly net inflows, marking their sixth weekly inflow in a row. The macro-group posted a positive return of 0.70% on the week.
Growth/value-large cap ETFs (+$5.3 billion), equity income fund ETFs (+$1.6 billion), sector-energy ETFs (+$656 million), and sector-financial/banking ETFs (+$426 million) were the largest equity ETF subgroups to post inflows this week. Growth/value-large cap ETFs have logged five straight weekly inflows as they realized a positive 0.46% on the week. Equity income fund ETFs have put up 12 straight weeks of positive inflows, despite posting their first negative weekly performance in four (-0.09%).
International equity ETFs (-$1.5 billion), sector-technology (-$814 million), and growth/value-small cap ETFs (-$738 million) were the top flow detractors under the macro-group. International ETFs logged their first weekly outflow in six weeks while they suffered their largest outflow of the year. The subgroup still realized their fourth straight week of plus-side performance (+0.30%). Sector-technology ETFs have observed eight weeks of outflows over the last 10.
Over the past fund-flows week, the top three equity ETF flow attractors were iShares: Core S&P 500 (IVV, +$7.0 billion), Invesco QQQ Trust 1 (QQQ, +$2.2 billion), and Select Sector: Energy SPDR (XLE, +$734 million).
Meanwhile, the bottom three equity ETFs in terms of weekly outflows were SPDR S&P 500 ETF (SPY, -$4.1 billion), JPMorgan: BetaBuilders Europe (BBEU, -$2.2 billion), and iShares: Russell 2000 ETF (IWM, -$959 million).
Exchange-Traded Fixed Income Funds
Exchange-traded fixed income funds observed a small $422 million weekly inflow—the macro-group’s eighth straight week of inflows. Fixed income ETFs reported a weekly return of negative 0.46% on average—the macro-group’s thirteenth week of sub-zero performance over the last 14.
Flexible funds ETFs (+$1.4 billion), corporate-high yield ETFs (+$668 million), international & global debt ETFs (+$213 million), and corporate-investment grade ETFs (+$188 million) were the top attractors of capital under fixed income ETFs. Flexible funds ETFs witnessed their largest weekly intake since March 2020. Corporate-high yield ETFs have now registered three straight weeks of weekly inflows for the first time since the week ended January 5, 2022.
Government-Treasury ETFs (-$1.9 billion), government-mortgage ETFs (-$76 million), and government-Treasury & mortgage ETFs (-$6 million) witnessed the only outflows under the fixed income ETF macro-group. Government-Treasury ETFs realized their second weekly outflow in 10 weeks and only their sixth net outflow all year. This was the largest weekly outflow for Government-Treasury ETFs since November 2020.
Municipal bond ETFs reported a $364 million outflow over the week, marking their first weekly outflow in seven weeks. The subgroup realized a negative 0.32% on average.
iShares: Broad USD High Yield Corporate Bond ETF (USHY, +$711 million) and SPDR Bloomberg High Yield Bond ETF (JNK, +$674 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: iBoxx $High Yield Corporate ETF (HYG, -$1.7 billion) and SPDR Bloomberg 1-3 Month T-Bill (BIL, -$1.5 billion) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$4.8 billion) for the seventeenth straight week. Conventional equity funds posted a weekly return of positive 0.81%, marking their fourth consecutive week of the plus-side performance. This is the fifteenth straight week the macro-group has observed a four-week outflow moving average of more than $2.2 billion.
International equity (-$2.1 billion), growth/value-large cap (-$1.8 billion), and growth/value-aggressive funds (-$577 million) were the largest subgroup outflows under conventional equity funds. International equity conventional funds have suffered eight straight weeks of outflows, all greater than $1.4 billion. The subgroup has logged its largest monthly outflow since February 2021 in May.
Sector-other funds (+$259 million), sector-energy (+$49 million), and gold and natural resources funds (+$41 million) were the top attractors of capital over this fund-flows week. Sector-other conventional funds have reported 11 weeks of inflows in the past 12. The subgroup has realized four straight weeks of positive returns, recording a positive 1.75% this week.
Conventional Fixed Income Funds
Conventional taxable-fixed income funds realized a weekly outflow of $3.2 billion—marking their twentieth straight week of outflows. The subgroup has produced a negative four-week flow moving average of at least $1.3 billion in 19 consecutive weeks. The macro-group recorded a negative 0.33% on average—their first week of sub-zero performance in three.
Corporate-investment grade (-$3.1 billion), government-Treasury (-$546 million), balanced funds (-$265 million), and government-mortgage funds (-$262 million) led the macro-group in outflows. Conventional corporate-investment grade funds have now suffered 17 consecutive weeks of outflows; all 16 weeks have been larger than $1.5 billion. The subgroup has posted a negative weekly performance in 13 of the last 14 weeks, realizing a negative 0.45% this week.
Corporate-high yield (+$668 million) and flexible funds (+$589 million) were the only subgroups to log weekly inflows. The subgroups realized a negative 0.96% and positive 0.02% on the week, respectively.
Municipal bond funds (ex-ETFs) returned a negative 0.57% over the fund-flows week—their first sub-zero performance in three. The subgroup experienced $1.7 billion in outflows, marking its twentieth week of outflows in 21. The subgroup has logged 19 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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