During Refinitiv Lipper’s fund-flows week that ended March 2, 2023, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the second week in three, adding a net of $38.8 billion.
Money market funds (+$55.0 billion) were the only group to log inflows for the third week straight. Equity funds (-$13.5 billion), taxable bond funds (-$1.7 billion), and tax-exempt bond funds (-$905 million) all reported outflows.
Index Performance
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices reported negative returns for the second straight week. The DJIA (-1.16%), Nasdaq (-1.11%), and S&P 500 (-0.99%) all depreciated while the Russell 2000 (+0.20%) realized a small gain.
The Bloomberg Municipal Bond Total Return Index (-0.05%) and the Bloomberg U.S. Aggregate Bond Total Return Index (-056%) suffered their fifth week of negative returns over the last six.
Overseas indices traded mixed—Shanghai Composite (+0.77%), Dax 30 TR (-0.21%), FTSE 100 (-0.69%), and Nikkei 225 (+0.39%).
Rates/Yields
The 10-two Treasury yield spread remained negative (-0.89), marking the lowest level since the 1980s.
According to Freddie Mac, the 30-year fixed-rate average (FRM) increased for the fourth consecutive week—currently at 6.65%. Both the United States Dollar Index (DXY, -0.10%) and the VIX (-8.15%) fell over the course of the week.
Market Recap
Our fund-flows week kicked off on Thursday, February 23, with the Department of Commerce reporting real GDP had a gain of 2.7% in Q4 2022—lower than the 2.9% estimated gain. The increase in GDP follows a Q3 gain of 3.2%. The Department of Labor released the weekly initial jobless claims rate which showed a decrease of 2,000 from the previous week—seasonally adjusted claims were 190,000. Equity markets performed well on the day—Nasdaq (+0.72%), Russell 2000 (+0.71%), S&P 500 (+0.53%), and DJIA (+0.33%).
The calendar week ended Friday, February 24, with the Department of Commerce publishing the Federal Reserve’s key inflation gauge, the core Personal Consumption Expenditures (PCE) index. Core PCE, which excludes energy and food prices, saw an increase of 0.6% month over month to a 12-month level of 4.7%. Both figures were larger than estimates—January’s monthly increase was the largest core PCE gain in more than 20 years. The massive gain followed a 0.4% increase in December. The U.S. Census Bureau reported that sales of new single-family houses increased 7.2% from December’s rate to an annual rate of 670,000. Equity markets fell on the day—Nasdaq (-1.69%), S&P 500 (-1.05%), DJIA (-1.02%), and Russell 2000 (-0.92%).
On Monday, February 27, the National Association of Realtors (NAR) reported its Pending Home Sales Index (PHSI) with an increase of 8.1% from December, signaling the second straight monthly gain and largest since June 2020. The U.S. Census Bureau also published its Durable Goods Report showing new orders for manufactured goods decreased by $13.0 billion (-4.5%) in January, marking the second monthly decline in three. Treasury yields fell on the day as equity markets recorded slight gains—Nasdaq (+0.63%), Russell 2000 (+0.31%), S&P 500 (+0.31%), and DJIA (+0.22%).
On Tuesday, February 28, the Conference Board’s Consumer Confidence Index fell to 102.9 in January, lower than economists’ forecasts. The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported that home prices fell 0.3% in December and were up 5.8% from last year. This was the sixth consecutive month of declines as the index is now 4.4% below its June peak. Both the two-(+0.08%) and 30-year Treasury yields (+0.28%) increased over the day, while the intermediate terms fell. The small-cap-focused Russell 2000 was the only broad-based U.S. equity index to appreciate on the day (+0.04%).
Our fund-flows week wrapped up Wednesday, March 1, with the Institute for Supply Management (ISM) Manufacturing PMI reporting a reading of below 50%, signaling a contraction. This was the fourth straight month the ISM indicated contraction. Both Minneapolis’ Neel Kashkari and Atlanta’s Fed President Raphael Bostic stated that interest rates need to move about 5.0% before any easing of monetary policy should begin. Bostic said, “We’re not there yet” and that “we must defeat inflation now.” Equity markets traded mixed—Russell 2000 (+0.08%), DJIA (+0.02%), S&P 500 (-0.47%), and Nasdaq (-0.66%). The 10-year Treasury yield increased by 2.10% on the day.
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $7.6 billion in weekly net outflows, marking the second straight week of outflows and the largest since December 2022. The macro-group posted a loss of 0.50% on the week.
Growth/value-large cap ETFs (-$4.7 billion), sector-other ETFs (-$1.4 billion), and growth/value-small cap ETFs (-$819 million) were the largest outflows under the macro-group. Growth/value-large cap ETFs realized negative weekly performance (-0.93%) for the third week in four as they posted their fifth straight weekly outflow.
International equity ETFs (+$1.3 billion), growth/value-aggressive ETFs (+$361 million), and convertible & preferreds ETFs (+$9 million) were the only subgroups to see inflows over the week. International equity ETFs have seen 10 straight weeks of inflows. Growth/value- aggressive cap ETFs have suffered back-to-back weeks of negative performance as they log their first weekly inflow in three.
Over the past fund-flows week, the top two equity ETF flow attractors were JPMorgan: Equity Premium Income (JEPI, +$511 million) and JPMorgan: Beta Builders Europe (BBEU, +$424 million).
Meanwhile, the bottom two equity ETFs in terms of weekly outflows were SPDR S&P 500 ETF (SPY, -$2.3 billion) and Invesco QQQ Trust 1 (QQQ, -$1.3 billion).
Exchange-Traded Fixed Income Funds
Exchange-traded fixed income funds observed a net $1.7 billion weekly inflow—the macro-group’s third weekly inflow in four. Fixed income ETFs reported a weekly return of negative 0.21% on average, their fourth consecutive weekly loss.
Government-Treasury ETFs (+$2.9 billion), corporate-investment grade ETFs (+$1.3 billion), and corporate-high quality ETFs (+$5 million) logged the top weekly inflows under taxable fixed income subgroups. Despite observing four straight weeks of losses, Government-Treasury ETFs logged their third weekly inflow in as many weeks.
Corporate-high yield ETFs (-$1.7 billion), international & global debt ETFs (-$595 million), and flexible funds ETFs (-$219 million) were the top subgroups to observe weekly outflows. Despite realizing their first week in four with positive performance, corporate-high yield ETFs reported their third consecutive weekly outflow.
Municipal bond ETFs reported a $265 million outflow over the week, marking their sixth straight weekly outflow. The subgroup realized a negative 0.04% average, their fourth straight week of losses.
iShares: Bloomberg 1-3 Month T-Bill ETF (BIL, +$1.6 million) and iShares: Short Treasury Bond ETF (SHV, +$1.3 billion) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, SPDR Preferred Intermediate-Term Treasury ETF (SPTI, -$779 million) and SPDR Preferred Long-Term Treasury ETF (SPTL, -$603 million) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$6.0 billion) for the fifty-sixth straight week. Conventional equity funds posted a weekly return of negative 0.45%.
Growth/value-large cap (-$3.0 billion), international equity (-$1.2 billion), and growth/value-aggressive cap (-$470 million) were the largest subgroup outflows under conventional equity funds. Growth/value-large cap funds logged their tenth straight weekly outflow. The subgroup’s four-week flow moving average has remained negative for 58 consecutive weeks.
Sector-real estate (+$65 million) was the only weekly inflow under equity mutual funds. This subgroup has posted inflows in four of the last five weeks, despite suffering four straight weeks of sub-zero returns.
Conventional Fixed Income Funds
Conventional taxable-fixed income funds realized a weekly outflow of $3.4 million—marking their second straight outflow. The macro-group suffered a negative 0.21% on average—their fourth consecutive weeks of negative returns.
Conventional corporate-investment grade funds (-$1.5 billion), flexible funds (-$730 million), and corporate-high yield (-$664 million) reported the largest weekly outflows under taxable fixed income conventional funds. Corporate-investment grade mutual funds witnessed their first weekly outflow in the last eight weeks as they realized a negative 0.21 on the week.
Conventional corporate-high quality funds (+$106 million) and government-Treasury & mortgage (+$87 million) were the only taxable fixed income macro-group to produce inflows. Corporate-high quality funds have attracted inflows in five straight weeks while observing negative weekly returns in five of the last six weeks.
Municipal bond conventional funds (ex-ETFs) returned a positive 0.06% over the fund-flows week—their first week of gains in four. The subgroup experienced $640 million in outflows, marking the second straight week of outflows.
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