by Jack Fischer.
During Refinitiv Lipper’s fund-flows week ended December 21, 2022, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the third week in four, removing a net $61.4 billion.
Money market funds (-$24.4 billion), equity funds (-$19.5 billion), taxable funds (-$14.4 billion), and tax-exempt bond funds (-$3.1 billion) all posted outflows.
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices reported negative performance for the second week in three—Nasdaq (-4.13%), S&P 500 (-2.93%), Russell 2000 (-2.39%), and DJIA (-1.74%).
The Bloomberg Municipal Bond Total Return Index (-0.49%) realized its first week of sub-zero returns in eight weeks. The Bloomberg U.S. Aggregate Bond Total Return Index (-1.21%) also logged a negative weekly performance, its first in six.
Overseas indices traded negative—Shanghai Composite (-3.82%), Nikkei 225 (-4.26%), Dax 30 TR (-2.81%), and FTSE 100 (-2.37%) all reported losses.
The 10-two Treasury yield spread remained negative (-0.53), marking the one-hundred-and-twenty-second straight trading session with an inverted yield curve. As of Wednesday, December 21, investors will receive greater compensation for investing in the two-year Treasury note (4.22%) than the 10-year (3.68%).
According to Freddie Mac, the 30-year fixed-rate average (FRM) decreased for the sixth consecutive week—currently at 6.27%. The United States Dollar Index (DXY, +0.38%) increased while the VIX (-12.71%) fell over the course of the week.
Our fund-flows week kicked off on Thursday, December 15, when the Department of Labor (DOL) reported the seasonally adjusted initial unemployment claims came in at 216,000, which was an increase of 2,000 from the prior week’s data. Continued claims were 1,537,044, a week-over-week decrease of 49,110. Continued weekly claims were 2,138,003 for the same week last year. The United States Census Bureau released its advanced monthly sales for November retail and food services which detailed a 0.6% decrease from October, but sales were up 6.5% from last year. Retail trade sales were down 0.8% from October 2022, while up 5.4% from October 2021. Equity markets stumbled on the day—Nasdaq (-3.23%), Russell 2000 (-2.52%), S&P 500 (-2.49%), and DJIA (-2.25%).
The calendar week ended Friday, December 16, with equity markets falling for the third straight day—led by the S&P 500 (-1.11%). The S&P Global Flash U.S. PMI Composite Output Index fell to a four-month low (44.6). The Manufacturing PMI also fell to a 31-month low (46.2)—a reading of below 50 indicates deteriorating conditions. Treasury yields on the short end of the curve fell, the two-year (-1.58%), while longer-dated yields increased on the day, 30-year (+1.09%).
On Monday, December 19, markets fell for the fourth straight daily session—Nasdaq (-1.49%), Russell (-1.41%), S&P 500 (-0.90%), and DJIA (-0.49%). Treasury yields rose across all dated issues, led by the 10-year (+2.90%). The news of the day came from the National Association of Home Builders (NAHB), which published its report on the housing market showing builder confidence in newly built single-family homes fell for the twelfth straight month and hit its lowest confidence reading since mid-2012 (outside of the spring of 2020). NAHB Chair Jerry Konter said, “In this high inflation, high mortgage rate environment, builders are struggling to keep housing affordable for home buyers.”
On Tuesday, December 20, the Bank of Japan unexpectedly expanded its yield curve control by boosting the leeway on the 10-year JGB yield from 0% to 0.5%, ultimately leading to a selloff of government debt. Many market participants view this move as Japan’s end to their loose monetary policy as inflation worries persist. Also on Tuesday, the Department of Commerce reported a decrease in building permits in November, the largest decrease since the peak of COVID-19. Building permits for privately owned housing dropped 11.2% from October, leading to an annual rate of 1.342 million. Equity markets were largely unchanged, while Treasury yields increased for the third straight day, led by the 30-year yield (+3.12%).
Our fund-flows week wrapped up Wednesday, December 21, with a surprise increase in consumer confidence. The Conference Board’s Consumer Confidence Index (CCI) increased more than expected to 108.3, up from November’s 101.4, marking the highest level since April and the first month-over-month improvement in three months. Mortgage applications increased by 0.9% from last week according to data from the Mortgage Bankers Association (MBA) weekly survey. The National Association of Realtors (NAR) stated that existing home sales fell 7.7% last month, leading to an annual rate of 4.09 million, its tenth straight month of declines. Equity markets saw their best day in nearly two weeks—Russell 2000 (+1.65%), DJIA (+1.60%), Nasdaq (1.54%), and S&P 500 (+1.49%).
Exchange-traded equity funds recorded $17.0 billion in weekly net outflows, marking the third week of outflows in four and the sixth largest outflow of all time. The macro-group posted a negative return of 2.48% on the week.
Growth/value-large cap ETFs (-$15.4 billion), sector-other ETFs (-$1.7 billion), and sector-technology ETFs (-$881 million) were the largest outflows under the macro-group. Growth/value-large cap ETFs realized negative weekly performance (-3.08%) for the second week in three as the subgroup recorded their second largest outflow on record and fourth in the last five.
Equity income funds ETFs (+$1.7 billion), growth/value-small cap ETFs (+$510 million), and sector-healthcare/biotech ETFs (+$200 million) were the top subgroups to see inflows over the week. Equity income funds ETFs have been arguably the hottest subgroup under equity ETFs. The subgroup has amassed 26 straight weeks of inflows, with 19 of their top 25 all-time weekly inflows coming in 2022.
Over the past fund-flows week, the top two equity ETF flow attractors were ProShares: UltraPro ETF (TQQQ, +$561 million) and iShares: Russell 1000 Value ETF (IWD, +$531 million).
Meanwhile, the bottom two equity ETFs in terms of weekly outflows were SPDR S&P 500 ETF (SPY, -$8.1 billion) and iShares: Core S&P 500 (IVV, -$4.1 billion).
Exchange-traded fixed income funds observed a net $6.1 billion weekly outflow—the macro-group’s first outflow in three weeks and the fourth largest outflow on record. Fixed income ETFs reported a weekly return of negative 0.69% on average, its first week in the red over the last six.
Corporate-high yield ETFs (-$2.9 billion), corporate-investment grade ETFs (-$1.6 billion), and government-Treasury ETFs (-$654 million) logged the top weekly outflows under taxable fixed income subgroups. Corporate-high yield ETFs have suffered three weekly outflows in the last four despite having only one week of negative performance in six.
There were no taxable fixed income subgroups to report weekly inflows.
Municipal bond ETFs reported a $313 million outflow over the week, marking their first outflow in nine weeks. The subgroup realized a negative 0.53% on average, their first sub-zero return in eight weeks.
iShares: Core US Aggregate Bond ETF (AGG, +$639 million) and iShares: 1-5 Investment Grade Corporate Bond (IGSB, +$381 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: iBoxx $Investment Grade Corporate ETF (LQD, -$1.5 billion) and Invesco BulletShares 2022 Corporate Bond ETF (BSCM, -$1.4 billion) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$2.5 billion) for the forty-sixth straight week. Conventional equity funds posted a weekly return of negative 2.71%.
International equity funds (-$5.2 billion), global equity funds (-$1.1 billion), and sector-other funds (-$455 million) were the largest subgroup outflows under conventional equity funds. International equity funds recorded their eighth-largest weekly outflow of all time, while also returning a weekly loss of 2.22%. The subgroup has suffered its thirty-sixth consecutive weekly outflow.
Growth/value-large cap (+$3.9 billion), equity income (+$832 million), and growth/value-aggressive (+$466 million) were the top weekly inflows under equity mutual funds. Growth/value-large cap funds saw their first weekly inflow in 13 weeks while also recording their largest weekly inflow of the year.
Conventional taxable-fixed income funds realized a weekly outflow of $8.3 billion—marking their eighteenth straight weekly outflow. The macro-group recorded a negative 1.10% on average—their first week in seven observing losses.
Conventional corporate-investment grade funds (-$4.5 billion), flexible funds (-$1.8 billion), and corporate-high yield funds (-$633 million) led the macro-group in outflows. Corporate-investment grade funds suffered their eighteenth consecutive week of outflows. The subgroup realized a negative 0.86% on the week, their first week in six recording sub-zero returns.
The only conventional taxable fixed income fund to receive weekly inflows was corporate-high quality funds (+$169 million). Corporate-high quality funds saw only their second weekly inflow in seven weeks despite realizing a loss of 1.58% on average.
Municipal bond conventional funds (ex-ETFs) returned a negative 0.81% over the fund-flows week—their first week of losses in six. The subgroup experienced $2.8 billion in outflows, marking the eighteenth consecutive week of outflows. Conventional municipal bond funds have only experienced five weeks of inflows year to date.
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