by Jack Fischer.
The data sourced in the article below is derived from Lipper’s Global Fund Flows application which may differ slightly from the Lipper US Fund Flow data due to timing and methodology. This new application can be found on LSEG Workspace.
During LSEG Lipper’s fund-flows week that ended September 13, 2023, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the third straight week, adding a net $18.7 billion.
Equity funds (+$9.6 billion), money market funds (+$9.4 billion), and taxable bond funds (+$961 million) registered inflows, while alternatives funds (-$637 million), tax-exempt bond funds (-$306 million), mixed-assets funds (-$246 million), and commodities funds (-$84 million) suffered outflows over the week.
At the close of LSEG Lipper’s fund-flows week, U.S. broad-based equity indices reported mixed returns—the Russell 2000 (-1.78%) and Nasdaq (-0.42%) were negative for the week, while the S&P 500 (+0.04%) and DJIA (+0.38%) were in the black. This was the second consecutive week of losses for the Russell 2000.
The Bloomberg Municipal Bond Total Return Index (-0.11%) recorded its sixth sub-zero return in seven weeks. The Bloomberg U.S. Aggregate Bond Total Return Index (+0.44%) logged its third weekly gain in four weeks.
Overseas indices traded mixed—Nikkei 225 (-1.53%), FTSE 100 (+1.36%), and DAX (-0.27%), and Shanghai Composite (-0.71%).
The 10-two Treasury yield spread has remained negative (-0.72) for more than one year. The 10- and 30-year Treasury yields fell over the week (-1.07% and -0.57%, respectively).
According to Freddie Mac, the 30-year fixed-rate average (FRM) rose for the first time in three weeks—the weekly average is currently at 7.18%. Both the United States Dollar Index (DXY,-0.09%) and VIX (-7.20%) fell over the course of the week.
The CME FedWatch Tool currently has the likelihood of the Federal Reserve increasing interest rates by 25 basis points (bps) at 3.0%. This tool forecasted a 12.0% possibility of the same hike one month ago. The next meeting is scheduled for September 20, 2023.
Our fund-flows week and the NFL season kicked off on Thursday, September 7, with the Department of Labor (DOL) reporting that initial jobless claims fell by 13,000 to 216,000 last week, marking the lowest level since February. Federal Reserve Bank of New York President John Williams noted that he believes the Fed has monetary policy “in a very good place in terms of we have a restrictive stance of policy.” Williams also commented that,
“We’ll have to keep watching the data carefully analyzing all of that and really asking ourselves the question: is this sufficiently restrictive?”
Dallas Fed President Lorie Logan warned that although we have seen lower inflation in the recent months, it may not be low enough. DJIA rose (+0.17%) on the day, while the S&P 500 (-0.32%), Nasdaq (-0.89%), and Russell 2000 (-0.99%) all depreciated. Treasury yields fell, led by the two-year Treasury yield (-1.51%).
On Friday, September 8, the Federal Reserve reported that total consumer credit increased by $10.4 billion in July after increasing $14 billion in June. Revolving credit rose $9.6 billion, or 9.2%, on an annual basis. The U.S. Census Bureau published its Monthly Wholesale Trade report that detailed sales of merchant wholesalers were up 0.8% from last month but down 4.2% from last year. The same report highlighted that total inventories were down 0.2% from June, but up 0.5% from July 2022. The month-over-month decline in total inventories marks the fifth straight month of decreases. Equity markets ended the calendar week mostly up—DJIA (+0.22%), S&P 500 (+0.14%), Nasdaq (+0.09%), and Russell 2000 (-0.23%).
On Monday, September 11, longer-dated Treasury yields increased, the 10- and 30-year Treasury yield rose 0.70% and 0.99%, respectively. Equity markets traded up with the Nasdaq (+1.14%) realizing the largest broad-based U.S. index gain. On her way back from the G20 summit in New Delhi, Treasury Secretary Janet Yellen felt the economy was heading in the right direction saying, “Every measure of inflation is down.” The ICE U.S. Dollar Index (DXY) fell (-0.5%) for the first session in seven, still holding on to its nearly 1.0% month-to-date gain.
On Tuesday, September 12, Google’s antitrust trial with the Department of Justice (DOJ) began; the DOJ is arguing that Google reached its monopolistic prowess through exclusive contracts and deals designed to make the company’s search engine the default on phones and internet browsers. The suit comes as Alphabet also faces litigation in Europe over competitive practices. Short-term Treasury yields rose a day ahead of the Consumer Price Index (CPI) report—two-year Treasury yield increased 0.50% on the day. Equity markets traded mainly down—Nasdaq (-1.04%), S&P 500 (-0.57%), DJIA (-0.05%), and Russell 2000 (+0.01%).
Our fund-flows week wrapped up Wednesday, September 13, with the August CPI reading that detailed a 0.6% increase month over month and a 3.7% rise year over year. The report cited higher gasoline and housing prices as the main attributor. Core-CPI, which excludes food and energy, increased 0.3% in August while rising 4.3% over the last 12 months. Both CPI and core-CPI annual readings came in slightly below estimates. Mortgage applications fell 0.8% last week, according to the Mortgage Brokers Association (MBA). The report also showed that applications to refinance decreased 5.4% while applications to buy a home increased 1.3%. Equity markets traded mixed with investors buying short-term Treasuries—two- and three-year Treasury yields fell 0.68% and 0.70%, respectively.
Exchange-traded equity funds recorded $13.4 billion in weekly net inflows, marking the ninth weekly inflow in 12. The macro-group posted a 0.27% loss on the week, its second consecutive week in the red.
Large-cap ETFs (+13.8 billion), equity income ETFs (+$728 million), and mid-cap ETFs (+$593 million) attracted the largest inflows among the equity ETF subgroups. Large-cap ETFs reported their second weekly inflow in three while attracting their largest total in 25 weeks. The ratio of total funds that reported an inflow versus outflow reached its highest (150.9%) level since December 2021. Only equity income ETFs (+0.18%) and developed global markets ETFs (+0.10%) realized positive returns on the week.
Emerging markets equity ETFs (-$841 million), multi-cap ETFs (-$614 million), and sector equity ETFs (-$243 million) suffered the largest weekly outflows under equity ETFs. Emerging markets equity ETFs have posted five straight weeks of outflows after attracting new capital in the five previous weeks. The last time this subgroup logged five straight weeks of outflows was back in September 2022.
Over the past fund-flows week, the top two equity ETF flow attractors were Invesco QQQ Trust Series 1 (QQQ, +$4.8 billion) and iShares: Core S&P 500 (IVV, +$4.0 billion).
Meanwhile, the bottom two equity ETFs in terms of weekly outflows were Invesco Russell 1000 Dynamic Multifactor ETF (OMFL, -$1.4 billion) and Health Care Select Sector SPDR Fund (XLV, -$811 million).
Exchange-traded taxable fixed income funds observed a $2.6 billion weekly inflow—the macro-group’s third weekly inflow in four. Fixed income ETFs reported a weekly return of positive 0.34% on average, their third week in the black over the last four.
Short/intermediate government & Treasury ETFs (+$1.2 billion), general domestic taxable fixed income ETFs (+$613 million), and government & Treasury fixed income ETFs (+$397 million) were the top three subgroups to net new capital. Short/intermediate government & Treasury ETFs have reported five weeks of inflows over the past six, while maintaining a positive four-week moving average in eight consecutive weeks.
Alternative bond ETFs (-$21 million) and world income funds (-$20 million) were the only groups under taxable bond ETFs to witness a weekly outflow. Despite both subgroups realizing a gain (0.58% and 0.10%, respectively) on the week, these subgroups logged their first weekly outflow in three weeks.
Municipal bond ETFs reported a $1.0 billion inflow over the week, marking their second weekly inflow over the past three weeks. The subgroup realized a negative 0.16%— its first negative weekly return in three weeks.
iShares Core US Aggregate Bond ETF (AGG, +$676 million) and Fidelity Total Bond ETF (FBND, +$276 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: iBoxx $Investment Grade Corporates ETF (LQD, -$677 million) and SPDR Portfolio Intermediate Term Corporate Bond ETF (SPIB, -$610 million) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$3.8 billion) for the sixty-first straight week. Conventional equity funds posted a weekly return of negative 0.39%, the second consecutive week of losses.
Multi-cap funds (-$906 million), equity income funds (-$571 million), and large-cap funds (-$491 million) were the top conventional equity fund subgroups to realize weekly outflows. Equity income funds was the only subgroup here to realize a weekly gain (+0.24%) as they observe their thirty-third consecutive weekly outflow. Conventional multi-cap funds have seen three straight weeks of outflows while suffering two straight weeks of negative returns.
No conventional equity fund subgroup reported inflows over this Lipper fund-flows week.
Conventional taxable-fixed income funds realized a weekly outflow of $1.7 billion—marking their third weekly outflow in four weeks. The macro-group logged a positive 0.39% on average—their third weekly gain in four.
Short/intermediate investment-grade funds (-$1.1 billion), high yield funds (-$257 million), and general domestic taxable fixed income funds (-$117 million) suffered the top outflows among conventional taxable fixed income subgroups over the trailing week. General domestic taxable fixed income is the only subgroup here to still have a positive four-week flow moving average. Short/intermediate investment grade funds have seen seven weekly outflows in the last nine weeks despite seeing gains in three of the last four weeks.
No conventional taxable fixed income fund subgroup reported inflows over this Lipper fund-flows week.
Municipal bond conventional funds (ex-ETFs) returned a negative 0.21% over the fund-flows week—their first weekly loss in three. The subgroup experienced a $1.3 billion outflow, marking the sixth straight weekly.
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