A man carries an umbrella in the rain as he passes the New York Stock Exchange October 16, 2014. Stocks on Wall Street rebounded from earlier lows on Thursday to trade little changed as a flurry of economic reports helped ease fears a weakening global economy would begin to affect the United States. REUTERS/Brendan McDermid (UNITED STATES – Tags: BUSINESS ENVIRONMENT)
Index Performance
At the close of the LSEG Lipper fund flows week ending December 17, 2025, U.S. broad-based indices were negative across the board. The Russell 2000 Total Return Index declined 2.59%, followed by the S&P 500 Total Return Index plunging 2.37%. Nasdaq faced the biggest reduction of 4.05%. The deceleration was due to a repricing of AI-linked mega-cap securities, as fears surrounding a potential AI-bubble resurfaced amid mixed economic data.
Broad-based fixed income indices recorded a slight uptick, as all major indices ended the period in positive territory. The FTSE High Yield Total Return Index had marginal gain of 0.02%, while the FTSE Municipal Tax-Exempt Investment Grade Bond Index climbed 0.04% for the period. The FTSE U.S. Broad Investment Grade Bond Total Return Index inched 0.03% higher.
Macro Viewpoint
Markets weakened midweek following the release of labor market data, as both nonfarm payrolls and the unemployment rate signaled further softening. The unemployment rate rose to 4.6%, its highest level since September 2021 and notably above the 4.2% value from the prior year. Total nonfarm payrolls increased by 64,000 in November, but we can likely expect a revision to this number given the lag in data collection.
Prior months data were also revised lower, strengthening the narrative of cooling labor conditions. August payrolls were revised down from -4,000 to -26,000 a 22,000 reduction, while September payrolls were revised from 119,000 to 108,000, an 11,000 decrease.
Market sentiment improved later in the week following the release of key inflation data. According to the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% month over month on a seasonally adjusted basis from September to November. On a 12-month basis, the all-items index rose 2.7% before seasonal adjustment, below the Reuters consensus estimate of 3%. Markets rallied on the softer-than-expected inflation data.
As we enter 2026, investors should be cautious about the cooling labor market and inflation indicators, which signal that additional monetary policy is needed to support the Federal Reserve’s dual mandate. While policymakers are likely to remain data-dependent, fears of another potential government shutdown loom in the distance, which could hinder policy easing should conditions continue to soften in the new year.
On the Yield Front
Yields moved lower following the labor data. The two-year declined 8 basis points, the five-year fell 6 basis points, and the 10-year stumbled 1.3 basis points, while the 30-year climbed 3 basis points.
Fund Flows by Asset Type
Equities retreated amid elevated volatility, as U.S. Equity Funds recorded $5 billion in net outflows, a sharp reversal from the prior week’s $1.7 billion in inflows. U.S. Commodities continued to attract interest, with flows up 73% from the prior week, supported by strong year-to-date performance in gold, silver, and platinum. As inflation pressures accelerate, investors appear to be repositioned toward real-asset hedges. U.S. Commodity Funds registered $2.3 billion in net inflows.
Within Fixed Income, U.S. Taxable Bond Funds saw inflows decline by nearly 50% from the prior week total to $2.8 billion. U.S Municipal Bond Funds posted a modest $400 million inflow, an increase from the prior week to $25 million, although overall demand remains flat.
U.S. Mixed-Assets Funds regained momentum and snapped a 52-week streak of outflows and attracted $5.4 billion in net inflows. This was driven primarily by U.S. Mixed-Asset Target Allocation funds, which drew in $6 billion in net inflows. U.S. Money Market Funds recorded $3.4 million in inflows, while U.S. Alternative Investment Funds experienced a $172 million in net outflows.
