The data sourced in the article below is derived from Lipper’s Global Fund Flows application. GFF can be found on LSEG Workspace (“FundFlows”).
During LSEG Lipper’s fund-flows week that ended January 17, 2024, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the fourth week in six, removing a net $22.4 billion.
Taxable bond funds* (+$7.8 billion, -0.21%), tax-exempt bond funds (+$897 million, -0.27%), and alternative funds (+$562 million, +0.07%) were the only attractors of net new capital.
Money market funds (-$22.5 billion, +0.10%), equity funds (-$8.2 billion, -1.43%), commodities funds (-$651 million, -0.74%), and mixed-assets funds (-$195 million, -1.15%) suffered outflows over the week.
*Bitcoin ETFs fall under the Lipper Alternative Currency Strategies Classification. The $1.8 billion inflow represents the data available at the time of writing.
Index Performance
At the close of LSEG Lipper’s fund-flows week, U.S. broad-based equity indices reported negative returns—the DJIA (-1.14%), Nasdaq (-0.76%), Russell 2000 (-2.90%), and S&P 500 (-0.92%) were all in the red.
Both the Bloomberg Municipal Bond Total Return Index (-0.40%) and Bloomberg U.S. Aggregate Bond Total Return Index (-0.30%) also fell over the week.
Overseas indices traded mostly down—DAX (-2.60%), FTSE 100 (-3.28%), Nikkei 225 (+1.04%), S&P/TSX Composite (-2.41%), and Shanghai Composite (-1.88%). The Nikkei 225 CR was the only broad-based index to record back-to-back weeks of positive returns.
Rates/Yields
The two-year (-0.37%) fell over the week, while the 10-year (+1.43%) rose over the course of the week. Although still inverted, the 10-two Treasury yield spread is hovering around October 2023 levels, which was the closest the yield curve has been to flat in the past 12 months.
According to Freddie Mac, the 30-year fixed-rate average (FRM) fell since last week, marking the tenth weekly decline in the last 12—the weekly average is currently at 6.60%. The United States Dollar Index (DXY, +1.06%) and VIX (+14.20%) both increased over the course of the week.
The CME FedWatch Tool currently has the likelihood of the Federal Reserve keeping interest rates at current levels at 97.4%. This tool forecasted an 8.3% possibility of a 25-bps cut one month ago. The next meeting is scheduled for January 31, 2024.
Market Recap
On Thursday, January 11, the Department of Labor (DOL) published its November consumer price index (CPI) print which increased 0.3% during December after rising 0.1% in November. Over the last year, the CPI rose 3.4% last month after 3.1% in November. Reuters polls showed economist had forecasted a 3.2% hike. With the calendar year coming to a close, inflation averaged around 4.1% in 2023 after an 8.0% average in 2022—marked by a June 2022 peak of 9.1%. Core-CPI, excluding volatile food and energy, rose 3.9% in December following a 4.0% jump in November. The DOL also reported initial claims for unemployment benefits came in at 203,000 (revised)—economists forecasted 210,000 for the week. Equity markets were mixed on the day—DJIA (+0.04%), Nasdaq (+0.00%), S&P 500 (-0.07%), and Russell 2000 (-0.75%). Treasury yields fell across the board, with shorter-dated yields leading the way—the two- (-2.47%), three- (-2.43%), and five-year (-2.31%) yields were all in the red.
The calendar week ended Friday, January 13, the DOL released the December Producer Price Index (PPI) Report showing a 0.1% fall in the month of December. Final demand prices also moved down in November (-0.1%) and October (-0.4%). Core-PPI, less energy, food, and trade services, increased 0.2% in December—they were also up in November (+0.1%) and October (+0.1%). Equity markets traded mixed once again—the S&P 500 (+0.08%) and Nasdaq (+0.02%) were up, while the Russell 2000 (-0.23%) and DJIA (-0.31%) were down. Yield along the curve fell outside the 30-year Treasury yield, which rose 0.29% on the day.
On Monday, January 15, markets were closed in observance of Martin Luther King Day.
On Tuesday, January 16, broad-based equity markets traded down on a relatively quiet economic events day—Russell 2000 (-1.21%), DJIA (-0.62%), S&P 500 (-0.37%), and Nasdaq (-0.19%). Treasury yields spiked as the two-year yield (+2.03%) saw its largest single day gain since December 8. Geopolitical tensions increased as the U.S. redesignated Yemen’s Houthis group as a foreign terrorist organization after the rebels launched anti-ship ballistics toward shipping vessels. The escalation in the Red Sea has forced logistics companies to halt travel through the area, disrupting global trade routes.
Our fund-flows week wrapped up Wednesday, January 17, with the Department of Commerce reporting that U.S. retail sales increased more than expected during December. Retail sales were up 0.6% (forecasts were +0.4%), with annual growth coming to 5.6% year on year. The biggest boosts in monthly gains were in online sales (+1.5%) and motor vehicles/parts dealers (+1.1%). Equity markets traded lower on the day—the Russell 2000 (-0.73%), Nasdaq (-0.59%), S&P 500 (-0.56%), and DJIA (-0.25%) were all down. Short-term Treasury yields increased for the second straight day—the two- (+2.79%) and five-year (+2.08%) yields were both up.
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $5.0 billion in weekly net outflows, marking the second straight week of outflows. Equity ETFs had attracted new capital in 14 consecutive prior weeks. The macro-group posted a 1.47% loss on the week, its second week in three realizing a loss.
Developed international markets ETFs (+$1.1 billion) and emerging markets equity ETFs (+$24 million) attracted the only inflows among the equity ETF subgroups. Developed international markets ETFs have posted four straight weeks of net inflows. This group was led by the Japanese Funds Lipper classification (+$806 million). Japanese Funds was also the only Lipper classification under the developed international markets ETF sub-group to realize a gain (+0.35%) over the past week.
Multi-cap ETFs (-$2.8 billion), large-cap ETFs (-$1.1 billion), and small-cap ETFs (-$578 million) suffered the top weekly outflows under equity ETFs. Multi-cap ETFs logged their first weekly outflow in seven weeks while observing their second negative weekly return in three weeks. This was the largest weekly outflow for the subgroup since December 22, 2021.
Over the past fund-flows week, the two top equity ETF flow attractors were iShares Core S&P 500 ETF (IVV, +$3.5 billion) and Invesco NASDAQ 100 ETF (QQQM, +$421 million).
Meanwhile, the two bottom equity ETFs in terms of weekly outflows were SPDR S&P 500 ETF Trust (SPY, -$5.1 billion) and iShares MSCI USA ESG Select ETF (SUSA, -$1.5 billion).
Exchange-Traded Fixed Income Funds
Exchange-traded taxable fixed income funds observed a $7.0 billion weekly inflow—the macro-group’s fourth straight inflow. Fixed income ETFs reported a return of a 0.27% loss on average, its third consecutive week in the red.
General domestic taxable fixed income ETFs (+$3.2 billion), alternative bond ETFs (+$1.7 billion) and high yield ETFs (+$1.1 billion) were the top subgroups under taxable bond ETFs to observe inflows. General domestic taxable fixed income ETFs have seen four straight weekly inflows, despite realizing losses in three consecutive weeks.
Emerging Markets Debt ETFs (-$144 million) was the only subgroup to see net outflows. This subgroup has witnessed back-to-back weeks of outflows and posted outflows in the last four of five.
Municipal bond ETFs reported a $189 million inflow over the week, marking their first week of inflows over the last three. The subgroup realized a negative 0.30% return—the second straight week of losses.
iShares iBoxx $Investment Grade Corporate Bond ETF (LQD, +$2.1 billion) and iShares Bitcoin Trust (IBIT, +$696 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, PGIM Ultra Short Bond ETF (PULS, -$254 million) and iShares JPMorgan USD Emerging Markets Bond ETF (EMB, -$229 million) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$3.3 billion) for the one-hundred-and-first straight week. Conventional equity funds posted a weekly return of negative 1.40%, the second week of losses in three.
Multi-cap funds (-$1.3 billion), mid-cap funds (-$982 million), and equity income funds (-$437 million) were the top conventional equity fund subgroups to realize weekly outflows. Multi-cap mutual funds saw their twenty-first consecutive weekly outflow as they realized a loss in two of the past three weeks.
Emerging markets equity funds (+$415 million) and small-cap conventional funds (+$242 million) were the only subgroups to report weekly inflows. Emerging markets equity funds see their first weekly inflow in 36 weeks, despite suffering three straight weeks of sub-zero returns.
Conventional Fixed Income Funds
Conventional taxable-fixed income funds realized a weekly inflow of $806 million—marking their third consecutive weekly inflow. The macro-group logged a negative 0.18% on average—their third straight weekly loss.
General domestic taxable fixed income funds (+$367 million), short/intermediate government & Treasury funds (+$188 million), and short/intermediate investment-grade funds (+$134 million) were the top subgroups to post inflows on the week. General domestic taxable fixed income funds have seen four consecutive weekly inflows, despite three straight weeks of negative returns.
High yield funds (-$69 million) and emerging markets debt funds (-$58 million) suffered the only outflows among conventional taxable fixed income subgroups over the trailing week. This was the fourth week in five where high yield conventional funds observed an outflow.
Municipal bond conventional funds (ex-ETFs) returned a negative 0.26% over the fund-flows week, marking two straight weeks of sub-zero returns. The subgroup experienced a $707 million inflow, marking the second straight inflow while ending a 23-week outflow streak.
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