by Jack Fischer.
During Refinitiv Lipper’s fund-flows week ended August 10, 2022, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the third week in four, removing a net $8.7 billion.
Both money market funds (-$11.9 billion) and tax-exempt funds (-$4.9 billion) suffered outflows, while equity funds (+$4.4 billion) and taxable bond funds (+$3.8 billion) attracted new capital.
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices traded positive for the sixth week in seven—S&P 500 (+1.33%), Nasdaq (+1.47%), Russell 2000 (+3.16%), and DJIA (+1.51%).
The Bloomberg Municipal Bond Total Return Index (-0.28%) ended the week in the red for the first week in eight. The Bloomberg U.S. Aggregate Bond Total Return Index depreciated 0.47%, marking only its second week in eight to log negative returns.
Overseas broad market indices traded positive for the second straight week—FTSE 100 (+2.05%), Nikkei 225 (+1.99%), Shanghai Composite (+2.07%), and Dax 30 (+3.07%).
The 10-two Treasury yield spread fell over the week to negative 0.43, marking the twenty-seventh straight trading session with an inverted yield curve and the lowest spread since August 2000. As of Thursday, July 27, investors will receive greater compensation for investing in the two-year Treasury note (3.21%%) than the 10-year (2.79%).
According to Freddie Mac, the 30-year fixed-rate average (FRM) increased for the first week in three, from 4.99% to 5.22%. Both the United States Dollar Index (DXY, -1.23%) and the VIX (-11.70%) decreased over the course of the week.
Our fund-flows week kicked off Thursday, August 4, with broad-based equity markets trading slightly mixed ahead of Friday’s key nonfarm payrolls report—Nasdaq (+0.41%), DJIA (-0.26%), Russell 2000 (-0.13%), and S&P 500 (-0.08%). The Department of Labor released its initial jobless claims report that showed claims increased to 260,000. Thursday also saw a run on Treasury securities, ending a four-day streak of rising Treasury yields, the two- and 10-year Treasury yields fell 2.28% and 2.62%, respectively. Internationally, the Bank of England (BoE) raised rates by 50 basis points (bps) to 1.75%, the largest increase since 1995. The central bank has forecasted a recession by the end of the year, lasting throughout 2023.
U.S. equity indices ended the calendar week on August 5, trading mixed for the second straight session—Russell 2000 (+0.81%), DJIA (+0.23%), S&P 500 (-0.12%), and Nasdaq (-0.50%). Treasury markets witnessed a massive selloff as yields rose across all dated issues—two- and 10-year Treasury yields increased 6.95% and 6.13%, respectively. The Department of Labor reported that employers added 528,000 jobs in July, a figure that was twice as large as the expected number. The unemployment rate fell to 3.5%, its lowest level since 1969. The market concern is that a resilient labor market paired with a strong Consumer Price Index print on Wednesday will cause the Federal Reserve to become more aggressive in its rate hikes.
On Monday, August 8, it was reported that the U.S. Senate passed the Inflation Reduction Act by a margin of 51-50, with Vice President Kamala Harris casting the tie-breaking vote. The bill will go to the House for a vote. The bill, according to estimates, will aim to lower both medical and energy costs with the goal of paying for itself. Analysts predict the measure will collect $739 billion in revenue while spending $433 billion. The bill also includes climate change incentives including tax credits for used and new electric vehicles (EVs). Markets reacted mixed with the small-cap-focused Russell 2000 (+1.01%) leading the way once again. The 10-year Treasury yield fell 2.71%.
On Tuesday, August 9, broad-based equity markets fell—Russell 2000 (-1.46%), Nasdaq (-1.19%), S&P 500 (-0.42%), and DJIA (-0.18%). Treasury yields increased led by the three- and five-year yields (+2.42% and +2.37%, respectively). Realtor.com, an online real estate company, highlighted that the number of listed homes for sale increased at a 12-month rate of 30.7%—the third straight month recording an increase in the annual rate. The site also reported that the total of newly listed homes dropped 2.8% over the trailing 12 months.
Our fund-flows week wrapped up Wednesday, August 10, with another scary CPI figure. The Department of Labor’s CPI for July came in as 8.5% on an annual basis. The good news is that the 12-month increase for July was down from June’s 9.1% print and below economists’ expectations. Core-CPI, excluding volatile food and energy, rose 5.9% annually and 0.3% month over month, also below expectations. Gas prices fell 7.7% from June, helping energy prices down 4.6% overall. Food prices increased 1.1% from last month and 10.9% over the 12 months, marking the largest annual increase since May 1979. Equity markets advanced with the daily winners being the Russell 2000 (+2.95%) and Nasdaq (+2.89%).
Exchange-traded equity funds recorded $7.3 billion in weekly net inflows, marking their second weekly inflow in three. The macro-group posted a positive return of 1.71% on the week, their fourth straight week of plus side returns.
Growth/value-large cap ETFs (+$8.2 billion), equity income funds ETFs (+$760 million), growth/value-small cap ETFs (+$426 million), and sector-healthcare/biotech ETFs (+$293 million) were the largest equity ETF subgroups to post inflows this week. Growth/value-large cap ETFs recorded their largest weekly inflow since the fund-flows week ending May 25. The subgroup realized a positive 1.43% on the week. Equity income funds ETFs have produced seven consecutive weeks of net inflows and are on pace to post their twenty-fifth straight month of inflows.
International equity ETFs (-$1.5 billion), sector-technology (-$740 million), gold and natural resources ETFs (-$221 million), and sector-real estate ETFs (-$175 million) were the top flow detractors under the macro-group. International equity ETFs suffered their largest weekly outflow since mid-June while ending six weeks of net inflows. The subgroup recorded its fourth straight week of plus-side performance, ending this week appreciating 1.80%.
Over the past fund-flows week, the top three equity ETF flow attractors were SPDR S&P 500 (SPY, +$3.7 billion), Invesco QQQ Trust 1 (QQQ, +$1.8 billion)., and iShares Core S&P 500 (IVV, +$1.1 billion).
Meanwhile, the bottom three equity ETFs in terms of weekly outflows were JPMorgan: BetaBuilders Europe (BBEU, -$1.6 billion), iShares: Core S&P Total USM (ITOT, -$820 million), and Invesco Russell 1000 Dynamic Multifactor (OMFL, -$416 million).
Exchange-traded fixed income funds observed a net $4.7 billion weekly inflow—the macro-group’s fifteenth inflow in 17 weeks. Fixed income ETFs reported a weekly return of negative 0.26% on average, its first week in three realizing a negative return.
Government-Treasury ETFs (+$2.2 billion), corporate-investment grade ETFs (+$1.5 billion), and flexible funds ETFs (+$463 million) were the largest weekly inflows under taxable fixed income ETFs. Government-Treasury ETFs have reported seven weeks of inflows over the last 10. While seeing persistent net inflows, the subgroup’s four-week moving inflow average has been falling, currently at $677 million and its lowest level since February. On the flip side, corporate-investment grade ETFs have seen seven straight weeks of inflows leading them to their largest four-week inflow moving average since September 2021.
Corporate-high quality ETFs (-$54 million) and government-mortgage ETFs (-$13 million) were the only subgroups to report outflows under taxable fixed income ETFs greater than $1 million. Corporate-high quality ETFs suffered their second straight week of net outflows as they realized their lowest-performing week (-0.59%) since June.
Municipal bond ETFs reported a $415 million inflow over the week, marking their first weekly outflow in four weeks. The subgroup realized a negative 0.20% on average, their first week in the red over the last eight.
iShares: 7-10 Treasury Bond ETF (IEF, +$1.3 billion) and iShares: Core US Aggregate Bond ETF (AGG, +$628 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: iBoxx High Yield Corporates (HYG, -$415 million) and iShares: Short Treasury Bond ETF (SHV, -$263 million) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$2.9 billion) for the twenty-seventh straight week. Conventional equity funds posted a weekly return of positive 1.76%, their fourth consecutive week of plus-side performance.
Growth/value-large cap funds (-$1.0 billion), international equity (-$770 million), and global equity funds (-$446 million) were the largest subgroup outflows under conventional equity funds. These three subgroups were in the top three of equity mutual fund outflows last week as well. Growth/value-large cap funds observed their seventeenth weekly outflow in a row moving their four-week moving outflow figure to reach its highest point since December. International equity conventional funds have also suffered 17 straight weeks of outflows, despite four consecutive weeks of positive performance. Their four-week outflow moving average has remained greater than $1.3 billion for 14 straight weeks.
Equity income funds (+$161 million), sector-healthcare/biotech (+$72 million), sector-other funds (+$40 million), and convertibles & preferreds funds (+$28 million) were the largest subgroup attractors of new capital under conventional equity funds. Equity income funds (ex-ETFs) ended four weeks of outflows and have only reported inflows in two of the last 10 weeks. The subgroup realized a positive 1.40% over the fund-flows week.
Conventional taxable-fixed income funds realized a weekly outflow of $974 million—marking their twenty-eighth weekly outflow in 29. The subgroup has produced a negative four-week flow moving average of at least $1.3 billion in 28 consecutive weeks. The macro-group recorded a positive 0.25% on average—their fourth straight week in the black.
Corporate-investment grade funds (-$1.4 billion), corporate-high yield funds (-$340 million), and balanced funds (-$110 million) led the macro-group in outflows. Corporate-investment grade funds witnessed their twenty-seventh straight weekly outflow as they recorded their first negative weekly return in three.
Flexible funds (+$530 million), government-Treasury & mortgage funds (+$250 million), government-Treasury funds (+$127 million), and government-mortgage funds (+$71 million) were the only taxable fixed income conventional fund subgroups to attract weekly inflows. Conventional flexible funds have produced five consecutive weeks of inflows as well as four straight weeks of plus-side performance.
Municipal bond conventional funds (ex-ETFs) returned a negative 0.24% over the fund-flows week—their first week of sub-zero performance in eight. The subgroup experienced $220 million in outflows. Conventional municipal bond funds have only experienced three weeks of inflows year to date.
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