Index Performance
U.S. broad-based indices ended the period mixed. The Russell 2000 Total Return Index declined 2.07%, followed by the Dow Jones Industrial Average (-0.42%), and Nasdaq (-0.16%). The S&P 500 Total Return Index slithered into the green with a 0.35% return.
Broad-based fixed incomes indices ended the period with mixed results across the board. The FTSE Municipal Tax-Exempt Investment Grade Bond Index rallied 0.21%, and the FTSE U.S. Broad Investment Grade Bond Total Return Index ticked 0.01% higher. The FTSE High Yield Total Return Index dipped 0.18%.
Macro Viewpoint
The guard changes at the Federal Reserve, with Kevin Warsh scheduled to act as the Chair of the Board of Governors of the Federal Reserve System. According to official statements from the White House, “Mr. Warsh has a distinguished background with degrees from Stanford University and Harvard Law. Mr. Warsh has also served as a Morgan Stanley executive and a leading economic advisor to the Bush Administration, and was the youngest Federal Reserve Governor involved in the management of the 2008 financial crisis.” The transition of the Fed chair is expected and aligns with ongoing disagreements between current Chair Jerome Powell and President Donald Trump regarding interest rate policies. President Trump has criticized Chair Powell for his perceived inaction on lowering interest rates, whereas Chair Powell has adopted a “wait-and-see” approach, citing uncertainty around the economic impact of tariffs imposed on a broad range of countries.
In other developments from Washington: a partial government shutdown occurred over the weekend. Unlike previous extended shutdowns, this shutdown is expected to be short-lived and largely centers around funding for the Department of Homeland Security. A resolution is anticipated once the House votes on the matter.
On the Yield Front
Yields dipped following the announcement of the new Fed chair. The two-year declined 8.7 basis points, the five-year edged lower by 5.2 basis points, and the 10-year remained relatively unchanged with a marginal dip of 1 basis point. On the other hand, the 30-year remained resilient and inched 1 basis point.
Fund Flows by Asset Type
At the close of the LSEG Lipper fund flows week ending January 30, 2026. U.S. equity funds are back in the race, scoring approximately $11.9 billion in net inflows. Notably, the star player has changed with investors pivoting away from U.S. Large-Cap Funds and finding shelter in U.S. Emerging Market Equity Funds and U.S. Sector Equity Funds, which has attracted $6.9 and $5.9 billion, respectively. This marked the second consecutive week of favorable inflows for U.S. Emerging Market Equity Funds. Sector-level growth was concentrated in cyclical areas, with strong inflows into Basic Materials ($1.3 billion), Financial Services ($1.4 billion), Industrials ($1.3 billion), and Science & Technology ($1.4 billion), which signals that investors are seeking exposure to cyclical growth companies.
Fixed income also continued to attract favorable flows. U.S. Taxable Bond Funds posted $10.3 billion in net inflows, with nearly half driven by U.S. Short/Intermediate Investment Grade Debt Fund, which gathered $5.4 billion. Momentum in Municipal bonds remained strong, with $2.0 billion in net inflows.
Despite a recent sell-off in Precious Metals, Commodity Funds recorded a solid $1.9 billion in net inflows. U.S. Money Market Funds returned to positive territory with $9.4 billion in net inflows, following a sizeable outflow in the prior week. U.S. Alternative Investment Funds attracted $1.1 billion, nearly doubling the previous week’s intake, led primarily by Dedicated Short Bias Funds, which recorded approximately $500 million in inflows. U.S. Mixed-Assets funds snapped their five-week slump and posted a marginal gain of $330 million.
