A screen displays the U.S. Federal Reserve’s announcement on the trading floor at New York Stock Exchange (NYSE) in New York City, New York, U.S., July 28, 2021. REUTERS/Andrew Kelly – RC2UTO9YH74G
Index Performance
At the close of LSEG Lipper’s fund-flows week ending July 30, 2025, U.S broad-based equity indices started the week off strong but tumbled during the final trading day: S&P 500 (-0.76%), Nasdaq (-2.24%), Russell 2000 (-2.19%), Dow Jones (-2.92%). The Bloomberg U.S. Aggregate Bond Total Return Index also fell (-0.85%).
Macro Viewpoint
Entering the year, the U.S. economy found itself navigating a challenging macroeconomic landscape, marked by a convergence of headwinds ranging from broad-based tariffs impacting nearly all major trading partners to a correction in equity makers, a weakening dollar, and a contraction in first-quarter GDP. Investors and policymakers braced for a downturn. Yet, despite mounting challenges, the economy has managed to sidestep the most feared outcome: recession.
In Q2, Real GDP increased at an annualized rate of 3.0%, signaling a modest rebound. The composition of growth was notably mixed: personal consumption expenditures (PCE) rose 1.4%, through this marked a sharp deceleration from the prior year. Gross private domestic investment fell 15.6%, primarily driven by a drawdown in private inventories. Net exports (trade) contributed positively, rising 5.0%, as a sharper decline in imports outweighs a pullback in exports. Government spending added a marginal 0.4% to growth. While consumer activity remains the linchpin of the U.S. expansion, its trajectory remains uncertain amid ongoing trade disruptions and higher costs.
The Federal Reserve maintained the federal funds rate steady at the July FOMC meeting, continuing its data dependent, “wait-and-see” posture. Despite a resilient labor market and low unemployment, Chair Jerome Powell acknowledged signs of softening in consumer spending, attributing part of the decelerating to elevated prices stemming from recent tariff actions. While markets have priced in a potential rate cut in the second half of the year, the Fed’s cautious tone has tempered expectations. The market remained neutral amid the noise, but now, all eyes are focused on the September meeting for potential recalibration.
On the trade front, the U.S. and European Union reached an agreement ahead of the August 1 deadline. According to correspondence from the White House, this deal is set to bolster U.S. industrial output, with the EU committing $750 billion in U.S. energy purchases and $600 billion in direct investment by 2028. As part of the deal, the EU will remove tariffs on U.S. industrial goods, while U.S. tariffs on automobiles, pharmaceuticals, and semiconductors will stand at 15%. The existing 50% tariff on base metals remains unchanged. Despite progress, not all bilateral negotiations are proceeding as planned. The Trump administration has granted Mexico a 90-day extension, and U.S.-China trade talks remain stalled ahead of the August 12 deadline, with limited progress following two days of what officials have described as “constructive” dialogue. The outcome of these negotiations will be critical, given the weight both economics carry in global trade.
Fund Flows by Asset Type
Fund flow data for the past week indicates a notable pivot in investor sentiment, characterized by a rotation out of defensive positioning and into risk assets. U.S. equity funds led the pack with $8.209.58 million in net inflows, suggesting renewed investor confidence, likely bolstered by a stronger than expected start to Q2 earnings season.
Fixed income strategies also saw robust demand, attracting $8,103 million in net inflows, amid a stable rate environment. Alternative investments posted $343 million in inflows; however, this marks a sharp 64.2% decline from the prior week. Commodities exhibited a similar decline, registering just $6.9 million in inflows, which is a steep decline from the prior week. Mixed-asset strategies remained largely unchanged, with a modest outflow of $234 million. However, the most pronounced shift occurred in money market funds, which experienced a net outflow of 1,662.92 million, representing a 120% reversal from the prior week’s inflow of $8119.23 million. This reallocation suggests a move out of cash equivalents and into higher-beta names. Overall, the week’s flow data signals growing investor optimism, supported by earnings momentum and a rising macro backdrop.
Performance by Lipper U.S. Classifications
Within the equity asset class, performance tilted decisively toward growth-oriented strategies. Large-Cap Growth posted the strongest weekly return (+0.81%), followed closely by Mid-Cap Growth (+0.78%, and Multi-Cap Growth (+0.67%), reflecting investor preference for high-quality growth exposures amid a strong earnings backdrop. Utility funds also advanced (+0.43%), while Small-Cap Growth recorded a modest gain (+0.15%).
Conversely, performance on the downside was led by Precious Metals Equity, which declined (-5.62%), pressured by weaker commodity pricing and a rotation away from hedges. Small-Cap Values followed (with a -3.29% return), reflecting weakness in cyclicals. Pacific Regions Funds (-1.99%), Real Estate (-1.84%) and Mid-Cap Value (-1.815%), also underperformed as investors derisked from intense volatility strategies.
Withing the Fixed Income asset class, returns were led by U.S. Government & Treasury Funds (which posted a +0.33% gain for the week). Emerging Marekts Debt followed (at +0.28%), U.S. Single-State Municipal and National Municipal Debt strategies advanced (+0.25% and +0.22%, respectively) as investors continued to seek tax-advantaged income. Short-Intermediate Corporate Debt posted a more modest return (of +0.16%).
On the downside, U.S. Alternative Bond strategies lagged (with a -0.67% return), impacted by idiosyncratic exposures and spread volatility. World Income (-0.20%) and High Yield (-0.03%), also detracted as investors took a more cautious stance against global credit and lower-rated issuers amid a mixed macro backdrop.
