by Jack Fischer.
During Refinitiv Lipper’s fund-flows week that ended January 4, 2023, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the second week in three, pumping in a net $37.06 billion.
Money market funds (+$57.8 billion) saw the only macro-group inflows, while equity funds (-$16.2 billion), tax-exempt bond funds (-$2.5 billion), and taxable funds (-$2.1 billion) all posted outflows.
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices reported positive performance for the first week in three—Nasdaq (+2.40), S&P 500 (+1.84%), Russell 2000 (+2.93%), and DJIA (+1.20%).
The Bloomberg Municipal Bond Total Return Index (+0.44%) and the Bloomberg U.S. Aggregate Bond Total Return Index (+1.02%) also logged their first positive weekly return in three.
Overseas indices traded positive as well—Shanghai Composite (+2.47%), Dax 30 TR (+3.91%), and FTSE 100 (+1.25%) all reported gains.
The 10-two Treasury yield spread remained negative (-0.68), marking the one-hundred-and-thirty-second straight trading session with an inverted yield curve.
According to Freddie Mac, the 30-year fixed-rate average (FRM) decreased for the third consecutive week—currently at 6.48%. Both the United States Dollar Index (DXY, -0.21%) decreased while the VIX (-0.59%) fell over the course of the week.
Our fund-flows week kicked off on Thursday, December 29, with the Department of Labor announcing the week’s seasonally adjusted initial unemployment claims coming in at 204,000, a decrease of 19,000 from the prior week. Oil markets rallied early but news of a surge in COVID-19 infections in China as they reopened their country led declines on the day—West Texas Intermediate crude fell 56 cents to $78.40. The Energy Information Administration said on Thursday that crude-oil inventories increased by 700,000 barrels over the week while the inventory of gasoline fell by 3.1 million barrels. Equity markets faired well on the day—Nasdaq (+2.59%), Russell 2000 (+2.57%), S&P 500 (+1.75%), and DJIA (+1.05%).
The calendar week ended Friday, December 30, with equity markets falling on the last trading day of 2022, led by the Russell 2000 (-0.28%). Longer-dated Treasury yields fell, while the two- (+0.82%), three- (+0.50%), and five-year (+0.23%) yields all increased. WTI crude rose 2.60% to $80.41 per barrel as gold futures increased (+0.20%) to $1,829.90 per ounce.
On Monday, January 2, markets were closed in celebration of the new year.
On Tuesday, January 3, the first trading day of 2023 ended in the red with the Nasdaq (-0.76%), Russell 2000 (-0.60%), S&P 500 (-0.40%), and DJIA (-0.03%). Longer-dated Treasury yields fell on the day while gold futures hit their highest levels in more than half a year. Crypto firm FTX co-founder and former CEO Sam Bankman-Fried pleaded not guilty in federal court on Friday to charges he defrauded investors and customers out of billions of dollars. The Department of Commerce reported that spending on construction increased 0.2% to a 12-month rate of $1.81 trillion—spending was up 8.5% from last year. Private nonresidential construction spending increased (+1.7%), while residential construction fell (-0.5%).
Our fund-flows week wrapped up Wednesday, January 4, with equity markets bouncing back—Russell 2000 (+1.25%), S&P 500 (+0.75%), Nasdaq (+0.69%), and DJIA (+0.40%). Markets still ended in the black despite the Federal Reserve minutes showing that policymakers have no plans to ease up on combating inflation anytime soon. The minutes highlighted that officials were speaking about the dangerous history of prematurely loosening monetary policy. Analysts are forecasting a 0.25% to 0.50% hike at the next Fed meeting.
Exchange-traded equity funds recorded $7.0 billion in weekly net outflows, marking the second week of outflows in three. The macro-group posted a positive gain of 2.15% on the week.
Growth/value-large cap ETFs (-$6.3 billion), sector-other ETFs (-$866 million), and sector-technology ETFs (-$540 million) were the largest outflows under the macro-group. Growth/value-large cap ETFs realized positive weekly performance (+2.01%) for the first week in three. Sector-other funds have suffered five straight weeks of outflows despite logging their first week of gains (+1.71%) in three.
Equity income funds ETFs (+$1.1 billion), international equity ETFs (+$378 million), and global equity ETFs (+$375 million) were the top subgroups to see inflows over the week. Equity income funds ETFs have remained the hottest subgroup under equity ETFs; the subgroup has amassed 28 straight weeks of inflows, with only six weekly outflows in the last 115 weeks. The subgroup reported an average performance of 1.67%.
Over the past fund-flows week, the top two equity ETF flow attractors were Schwab: US Dividend Equity ETF (SCHD, +$389 million) and iShares: MSCI ACWI (ACWI, +$326 million).
Meanwhile, the bottom two equity ETFs in terms of weekly outflows were SPDR S&P 500 ETF (SPY, -$4.9 billion) and Invesco QQQ Trust 1 (QQQ, -$1.9 billion).
Exchange-traded fixed income funds observed a net $4.7 billion weekly inflow—the macro-group’s fourth inflow in five weeks. Fixed income ETFs reported a weekly return of positive 0.68% on average, its first week in the black over the last three.
Government-Treasury ETFs (+$4.7 billion), corporate-investment grade ETFs (+$1.4 billion), and flexible funds ETFs (+$62 million) logged the top weekly inflows under taxable fixed income subgroups. Government-Treasury ETFs posted their third inflow over the past four weeks as they realized their largest weekly intake since July 2023.
Corporate-high yield ETFs (-$1.3 billion) and international & global debt ETFs (-$237 million) were the only subgroups to observe weekly outflows greater than $1 million. Corporate-high yield ETFs suffered their second outflow over the last three weeks, despite realizing their first weekly gain (+1.08%) in three.
Municipal bond ETFs reported a $621 million inflow over the week, marking their twelfth inflow in the last 15 weeks. The subgroup realized a positive 0.57% on average, their first plus-side return in three weeks.
iShares: 0-3 Month Treasury Bond ETF (SGOV, +$1.2 billion) and WisdomTree: Floating Rate Treasury (USFR, +$839 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, -$839 million) and iShares: Short Treasury Bond ETF (SHV, -$342 million) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$9.2 billion) for the forty-eighth straight week. Conventional equity funds posted a weekly return of positive 2.23%.
International equity funds (-$3.5 billion), growth/value-large cap (-$2.7 billion), and growth/value-aggressive cap (-$882 million) were the largest subgroup outflows under conventional equity funds. The international equity funds subgroup has suffered thirty-eight consecutive weekly outflow. The subgroup also realized a plus-side return of 2.61%
Equity income (+$93 million), gold and natural resources (+$23 million), and sector-utilities (+$8 million) were the top weekly inflows under equity mutual funds. Equity income funds have witnessed three consecutive weeks of inflows as they reported a 1.64% gain over the week.
Conventional taxable-fixed income funds realized a weekly outflow of $6.8 billion—marking their twentieth straight weekly outflow. The macro-group recorded a positive 1.08% on average—their first week in three observing gains.
Conventional corporate-investment grade funds (-$3.1 billion), flexible funds (-$1.6 billion), and corporate-high yield funds (-$945 million) led the macro-group in outflows. Corporate-investment grade funds suffered their twentieth consecutive week of outflows. The subgroup realized a positive 0.96% on the week, their first week in three recording plus-side returns.
The only conventional taxable fixed income subgroups to receive weekly inflows were government-Treasury & mortgage (+$16 million) and government-Treasury funds (+$4 million). Government-Treasury & mortgage funds saw their first weekly inflow over the last four weeks. The subgroup posted a positive gain of 0.77%.
Municipal bond conventional funds (ex-ETFs) returned a positive 0.90% over the fund-flows week—their first week of gains in three. The subgroup experienced $3.1 billion in outflows, marking the twentieth consecutive week of outflows. Conventional municipal bond funds only experienced five weeks of inflows in 2022.
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