During Refinitiv Lipper’s fund-flows week ended November 2, 2022, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the second straight week, adding a net $38.9 billion.
Equity funds (+$9.6 billion) and money market funds (+$35.8 billion) were the only macro-groups to attract funds, while tax-exempt funds (-$2.4 billion) and taxable bond funds (-$4.1 billion) posted outflows.
Index Performance
At the close of Refinitiv Lipper’s fund-flows week, the only U.S. broad-based equity index to realize positive performance was the DJIA (+0.97%), marking its third straight week in the black. Meanwhile, the Russell 2000 (-0.84%), S&P 500 (-1.85%), and Nasdaq (-4.07%) suffered their first negative weekly performance in three.
The Bloomberg Municipal Bond Total Return Index (+0.70%) posted sub-zero performance for the first week in three. The Bloomberg U.S. Aggregate Bond Total Return Index (-0.02%) has observed 12 weeks in the red in the past 13.
Overseas indices traded mixed, the Shanghai Composite (-1.18%) and DAX 30 (-1.30%) depreciated, while the FTSE 100 (+0.02%) and Nikkei 225 (0.49%) recorded gains for the third consecutive week.
Rates/Yields
The 10-two Treasury yield spread remained negative (-0.51), marking the eighty-seventh straight trading session with an inverted yield curve. As of Wednesday, November 2, investors will receive greater compensation for investing in the two-year Treasury note (4.57%) than the 10-year (4.06%).
According to Freddie Mac, the 30-year fixed-rate average (FRM) decreased for the first week in five—currently at 6.95%. The United States Dollar Index (DXY, +1.50%) rose, while the VIX (-5.57%) decreased over the course of the week.
Market Recap
Our fund-flows week kicked off Thursday, October 27, with the Bureau of Economic Analysis (BEA) releasing Q3 2022 Gross Domestic Product (GDP). Real GDP increased during the third quarter at an annual rate of 2.6%, ending two straight quarters of decreases. The BEA stated the quarterly growth was primarily due to increases in exports and consumer spending that were partly offset by a decrease in housing investment. The Department of Labor (DOL) published its unemployment insurance weekly claims report showing 217,000 new claims, a decrease of 1,000 from the prior week. In tech news, Elon Musk began his new leadership at Twitter (TWTR) by letting go of CEO Parag Agrawal and CFO Ned Segal, among others. His acquisition of Twitter has been highly touted for some time now. Musk’s short-term plans include removing bots and creating a subscription-based program. Equity markets traded mixed on the day—Nasdaq (-1.63%) was the laggard, while the DJIA (+0.61%) finished the strongest.
U.S. equity indices ended the calendar week on October 28 with strong performance—Nasdaq (+2.87%), S&P 500 (+2.46%), DJIA (+2.59%), and Russell 2000 (+2.25%). The University of Michigan’s Index of Consumer Sentiment (MCSI) was reported at 59.9, up from September and the index’s fourth straight month of gains. This was the highest level for the MCSI since April. The BEA released the Personal Income and Outlays report for September which highlighted an increase of $78.9 billion (+0.4%) in the month. Disposable personal income (DPI) increased by 0.4% while personal consumption expenditures (PCE) increased by 0.6%. According to the National Association of Realtors, pending home sales dropped for the fourth straight month, down 10.2% from August. Pending sales also decreased in all regions compared to one year ago. U.S. Treasury yields increased throughout the day, the two- and 10-year yields jumped 2.47% and 1.80%, respectively.
On Monday, October 31, equity markets fell ahead of Wednesday’s Federal Reserve’s decision on the next set of interest rate moves—Nasdaq (-1.03%) fell the most on the day. Treasury yields increased across the board for the second straight day, the two- and 10-year yields increased by 1.79% and 1.67%, respectively. A report from Grant Thornton indicated that investment professionals are forecasting an increase in merger and acquisition (M&A) activity over the next six months. The advisory firm found that 72% of survey respondents anticipate increased activity, despite market uncertainty, increasing interest rates, and decreasing accessibility to liquidity. Elon Musk continued to revamp TWTR as he dismissed all nine members of the company’s board, making himself the sole director of the company.
On Tuesday, November 1, the DOL published their Job Openings and Labor Turnover Survey (JOLTS) that found 10.72 million positions were available as of September month-end, which is up from 10.28 million reported on the last day of August. While openings were up, reported hirings slowed. Hirings fell by 2.5 million to 6.08 million, marking the fewest hires since February 2021. Equity markets fell for the second straight day as market participants anticipated another 75 basis points (bps) hike by the Fed—Nasdaq (-0.89%) once again was the top loser on the day.
Our fund-flows week wrapped up Wednesday, with the Fed raising the fed-funds rate by another 75 bps in the central bank’s fight against inflation. The fourth consecutive 75 bps hike puts the interest rate range at 3.75% to 4%, marking its highest range since 2008. Fed Chair Jerome Powell reiterated the policymaker’s main priority is to bring long-term inflation back down to 2%. Powell stated that it would be “very premature” to talk about pausing the rate hikes, saying “we still think there is some ground to cover” before the Fed can put a dent in the rising prices. Equity markets stumbled on the day—Russell 2000 (-3.36%), Nasdaq (-3.36%), S&P 500 (-2.50%), and DJIA (-1.55%).
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $17.5 billion in weekly net inflows, marking their fifth straight week of inflows and the largest since early March. The macro-group posted a negative return of 1.24% on the week.
Growth/value-large cap ETFs (+$10.4 billion), growth/value-small cap ETFs (+$1.9 billion), and equity income funds ETFs (+$1.4 billion) were the largest equity ETF subgroups to post inflows this week. Growth/value-large cap ETFs reported their seventh straight weekly inflow as their four-week flow moving average hits its highest level of the year.
Sector-utilities ETFs (-$229 million), sector-other ETFs (-$218 million), and sector-real estate ETFs (-$6 million) were the largest outflow subgroups under the macro-group. Sector-utilities suffered their fourth straight week of outflows as the group reported their third straight week of positive performance. Sector-other ETFs reported their seventh straight weekly outflow as their four-week outflow moving average extended to 20 consecutive weeks.
Over the past fund-flows week, the top three equity ETF flow attractors were SPDR S&P 500 ETF (SPY, +$6.7 billion), iShares: Core S&P 500 (IVV, +$1.1 billion), and SPDR Dow Jones Industrial Average ETF (DIA, +$932 million).
Meanwhile, the bottom three equity ETFs in terms of weekly outflows were Invesco QQQ Trust 1 (QQQ, -$1.4 billion), iShares: Core S&P Total US Market (ITOT, -$780 million), and SPDR Gold (GLD, -$706 million).
Exchange-Traded Fixed Income Funds
Exchange-traded fixed income funds observed a net $443 million weekly outflow—the macro-group’s first weekly outflow in five weeks. Fixed income ETFs reported a weekly return of positive 0.18% on average, its second straight week in the black.
Government-Treasury ETFs (-$3.2 billion), international & global debt ETFs (-$975 million), and flexible funds ETFs (-$369 million) logged the top weekly outflows under taxable fixed income subgroups. Government-Treasury funds suffered back-to-back weekly outflows for the first time since the first two weeks of January. The subgroup reported a negative 0.05% over the week, its eleventh week of sub-zero performance in the past 12 weeks.
Corporate-high yield ETFs (+$3.7 billion), government-mortgage ETFs (+$310 million), and corporate-investment grade ETFs (+$104 million) posted the largest inflows under taxable fixed income ETFs. Corporate-high yield ETFs recorded their largest weekly inflow since March 2020 and the second largest of all time. Corporates-investment grade has observed five straight weeks of inflows while gaining 0.07% over the week, on average.
Municipal bond ETFs reported a $737 million inflow over the week, marking their fourth weekly inflow in five weeks. The subgroup realized a positive 0.61% on average, their first week of plus-side performance in three.
SPDR Bloomberg High Yield Bond ETF (JNK, +$1.8 billion) and iShares: iBoxx $IG Corp Bond ETF (LQD, +$1.1 billion) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: Short Treasury Bond (SHV, -$3.1 billion) and SPDR Bloomberg 1-3 Month T-Bill ETF (BIL, -$1.4 billion) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$7.9 billion) for the thirty-ninth straight week. Conventional equity funds posted a weekly return of negative 1.37%.
Conventional growth/value-large cap funds (-$4.0 billion), international equity funds (-$1.1 billion), and equity income funds (-$764 million) were the largest subgroup outflows under conventional equity funds. Growth/value-large cap funds saw their sixth straight week of outflows. International equity funds have suffered 29 straight weeks of outflows as they returned a negative 0.89% on average over the week.
Sector-energy funds (+$8 million) was the only conventional equity fund subgroups to report a weekly inflow. This subgroup has reported three straight weeks of inflows and plus-side performance.
Conventional Fixed Income Funds
Conventional taxable-fixed income funds realized a weekly outflow of $3.6 billion—marking their eleventh straight weekly outflow. The macro-group recorded a negative 0.02% on average—their third week of sub-zero returns in four.
Conventional corporate-investment grade funds (-$2.2 billion), flexible funds (-$1.7 billion), and balanced funds (-$493 million) led the macro-group in outflows. Corporate-investment grade funds suffered their eleventh consecutive week of outflows. The subgroup realized a positive 0.15% on the week.
Conventional corporate-high yield funds (+$622 million), international & global debt funds (+$186 million), and government-Treasury (+$73 million) were the top taxable fixed income conventional funds subgroup to report inflows over the week. Conventional corporate-high yield funds reported their largest weekly inflow in 12 weeks as they ended 10 weeks of outflows. The subgroup reported their third straight positive weekly performance (+0.83%).
Municipal bond conventional funds (ex-ETFs) returned a positive 1.04% over the fund-flows week—their first week of gains in five. The subgroup experienced $3.1 billion in outflows, marking the eleventh consecutive week of outflows. Conventional municipal bond funds have only experienced five weeks of inflows year to date.
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