by Jack Fischer.
During Refinitiv Lipper’s fund-flows week that ended April 26, 2023, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the eighth week in nine, adding a net of $46.1 billion.
Money market funds (+$49.8 billion) were the only macro-group to report inflows. Equity funds (-$2.0 billion), taxable bond funds (-$1.6 billion), and tax-exempt bond funds (-$92 million) suffered outflows.
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices reported negative returns. The Russell 2000 (-3.84%), Nasdaq (-2.49%), S&P 500 (-2.37%), and DJIA (-1.76%) all suffered on the week. The DJIA and S&P 500 reported their first weekly loss in the last six weeks.
The Bloomberg Municipal Bond Total Return Index (+0.27%) recorded its seventh weekly gain in the past eight weeks. The Bloomberg U.S. Aggregate Bond Total Return Index (+0.95%) logged its first positive return in three weeks.
Overseas indices traded mixed—the Shanghai Composite (-3.48%) and FTSE 100 (-0.43%) depreciated, while the Dax TR (+0.15%) and Nikkei 225 (+0.28%) ended the week in the black.
The 10-two Treasury yield spread remained negative (-0.48), marking the two-hundred-and-twelfth straight trading session with an inverted yield curve. The two-year Treasury yield fell 7.95% on the week.
According to Freddie Mac, the 30-year fixed-rate average (FRM) increased for the second consecutive week—currently at 6.43%. The United States Dollar Index (DXY, -0.49%) fell, while the VIX (+13.71%) rose over the course of the week.
Our fund-flows week kicked off on Thursday, April 20, with the National Association of Realtors (NAR) reporting that existing home sales fell 2.4% in March and are down 22% from one year ago. The median price for existing home sales also fell by 0.9% year over year, which marked the largest 12-month decline since January 2012. Cleveland Federal Reserve President Loretta Mester said she believes that “monetary policy will need to move somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time.” Currently, the markets are forecasting another 25-basis point (bps) hike in the May 3 meeting. Equity markets fell on the day—Nasdaq (-0.80%), S&P 500 (-0.60%), Russell 2000 (-0.54%), and DJIA (-0.33%).
Equity markets traded slightly positive on Friday, April 21—Nasdaq (+0.11%), Russell 2000 (+0.10%), S&P 500 (+0.09%), and DJIA (+0.20%). The S&P Global flash U.S. Composite PMI Output Index increased to 53.5 from March’s reading of 52.3, marking the index’s highest level since March 2022. Treasury yields rose on the day with intermediate yields seeing the largest bump, the seven- and 10-year Treasury yields rose 1.00% and 0.96%, respectively.
On Monday, April 24, Bed Bath & Beyond (BBY) announced it will file for Chapter 11 bankruptcy protection after the struggling retailer failed to raise capital to keep its operations running. Before all the key tech companies start announcing their quarterly earnings, Trillium Capital LLC offered to buy the stock photo company Getty Images (GETY) for $4 billion. The deal was reported to pay $10 per share for GETY, with shares closing on Friday at $5.06. The Federal Reserve Bank of Chicago published its National Activity Index (CFNAI) which showed economic activity was unchanged (at -0.19 in March), with the three-month moving average increasing (to +0.01 from -0.09). The Federal Reserve Bank of Dallas reported that factory activity in Texas was flat in April after a slight growth in March. The production index, a measure of manufacturing conditions, was down to 0.9 from 2.5—near-zero reading implying no change in output from the prior month.
On Tuesday, April 25, First Republic Bank’s (FRC) stock price fell to a record low after the bank announced a huge drop in deposits and stated it would make “significant reductions” to help financial conditions improve. Along with slashing the workforce by 20% to 25%, the bank said it would decrease executive compensation, corporate office space, and scale back non-essential activities. FRC’s reported struggles have market participants questioning whether the Fed will pause rates at their next meeting. The Conference Board’s Consumer Confidence Index (CCI) fell to 101.3 from 104 in March. The index that monitors consumers’ short-term income, business, and labor market outlooks fell from 74 to 68.1—a reading of less than 80 indicating a recession within a year. Equity markets fell sharply with the Russell 2000 (-2.40%) leading the way. The two- and 10-year Treasury yields fell by their largest daily percentage since March 17 (-5.34% and -3.59%, respectively).
Our fund-flows week wrapped up Wednesday, April 26, with the Mortgage Bankers Association (MBA) reporting that mortgage applications were up 3.7% week over week. MBA’s vice president, Joel Kan, said that despite the weekly improvement, mortgage activity remains 28% below last year’s mark. He attributed the slowing to high-interest rates and limited supply. The 10-year Treasury yield increased 1.71% on the day, with equity markets trading mixed—Nasdaq (+0.47%), S&P 500 (-0.38%), DJIA (-0.68%), and Russell 2000 (-0.89%).
Exchange-traded equity funds recorded $6.1 billion in weekly net inflows, marking the third straight weekly intake. The macro-group posted a loss of 2.41% on the week, its first week in the red over the last six.
Growth/value-large cap ETFs (+$4.3 billion), growth/value-small cap ETFs (+$1.8 billion), and equity income ETFs (+$855 million) were the top subgroups to log inflows. This was the third straight weekly inflow for growth/value-large cap ETFs as they also posted their second largest intake of the year. The subgroup returned a negative 2.50% over the week, ending a five-week streak of positive returns.
Sector-energy ETFs (-$1.0 billion), sector-technology ETFs (-$693 million), and gold and natural resources ETFs (-$278 million) were the largest outflows under the macro-group. Sector-energy ETFs have suffered 18 weeks of outflows in the last 23 while recording back-to-back weeks of negative performance. Sector-technology ETFs reported their first weekly outflow in five weeks as the subgroup realized its second-worst weekly performance of the year (-3.61%).
Over the past fund-flows week, the top two equity ETF flow attractors were SPDR S&P 500 ETF (SPY, +$4.9 billion) and iShares: Russell 2000 ETF (IWM, +$935 million).
Meanwhile, the bottom two equity ETFs in terms of weekly outflows were Invesco QQQ Trust 1 (QQQ, -$1.0 billion). and Select Sector: Energy SPDR (XLE, -$739 million)
Exchange-traded fixed income funds observed a $238 million weekly outflow—the macro-group’s first weekly outflow in 10 weeks. Fixed income ETFs reported a weekly return of positive 0.72% on average, their first weekly gain in three.
Corporate-investment grade ETFs (-$1.2 billion), flexible funds ETFs (-$209 million), and international & global debt ETFs (-$173 million) were the top taxable fixed income subgroups to post outflows over the week. Corporate-investment grade ETFs ended a five-week stretch of inflows despite logging their first weekly gain in three weeks (+0.67%).
Corporate-high yield ETFs (+$682 million), government-Treasury ETFs (+$634 million), and corporate-high quality ETFs (+$44 million) logged the top weekly inflows under taxable fixed income subgroups. Corporate-high yield ETFs have attracted inflows for four weeks straight, even though the subgroup has seen negative performance in back-to-back weeks.
Municipal bond ETFs reported a $416 million inflow over the week, marking their first weekly inflow in the last three. The subgroup realized a positive 0.34% average, their seventh week of gains in eight.
iShares: 20+ Treasury Bond ETF (TLT, +$740 million) and SPDR Bloomberg High Yield Bond ETF (JNK, +$551 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: iBoxx $Investment Grade Corporates (LQD, -$1.3 billion) and iShares: TIPS Bond ETF (TIP, -$508 million) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$8.1 billion) for the sixty-fourth straight week. Conventional equity funds posted a weekly return of negative 2.20%, the first week of losses in six.
International equity (-$2.6 billion), growth/value-large cap (-$2.5 billion), and growth/value-small cap (-$907 million) were the largest subgroup outflows under conventional equity funds. International equity funds have recorded seven straight weeks of outflows along with reporting a negative four-week flow moving average in 54 consecutive weeks.
Sector-other funds (+$10 million) were the only subgroup to post a weekly inflow under equity mutual funds. After posting back-to-back weeks of losses, this subgroup realized its first inflow in four weeks.
Conventional taxable-fixed income funds realized a weekly outflow of $1.4 billion—marking their tenth straight weekly outflow. The macro-group logged a positive 0.09% on average—their first week of gains in three.
Flexible funds (-$707 million), balanced funds (-$410 million), and government-Treasury funds (-$147 million) reported the largest weekly outflows under taxable fixed income conventional funds. Flexible funds have now observed nine straight weeks of outflows while realizing five weeks of gains in the last six.
Conventional government-mortgage funds (+$70 million) and international & global debt funds (+$50 million) were the only taxable fixed income macro-group to produce inflows greater than $1 million. Government-mortgage funds attracted inflows for the first week in five as they posted their first plus-side return in three weeks (+0.93%).
Municipal bond conventional funds (ex-ETFs) returned a positive 0.47% over the fund-flows week—their seventh week of gains in nine. The subgroup experienced $509 million in outflows, marking the tenth straight week of outflows.
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