One World Trade Center rises amongst the downtown Manhattan skyline in New York City, U.S., July 22, 2025. REUTERS/Kylie Cooper
Index Performance
U.S. broad-based indices ended the period in red territory. The Dow Jones Industrial Average declined 0.50%, followed by the S&P 500 Total Return Index (-0.34%) and Russell 2000 Index (-0.32%). The Nasdaq Composite Index experienced a marginal drop of 0.06%.
Broad-based fixed income indices ended the period with mixed results across the board. The FTSE High Yield Total Return Index had a marginal gain of 0.12%, while the FTSE Municipal Tax-Exempt Investment Grade Bond Index declined 0.28%. The FTSE U.S. Broad Investment Grade Bond Total Return Index rallied 0.08%.
Macro Viewpoint
The new year has begun, yet inflation remains at the forefront of consumers’ minds. The latest release of the Personal Consumption expenditures (PCE) Price Index tells a familiar story, but there is much more to be told if we expect the PCE data to reach its April 2025 low and sustain a clear path for continued easing.
Personal income rose 0.1% in October and 0.3% in November, while disposable personal income increased 0.1% and 0.3%, respectively. Personal consumption expenditures also rallied 0.5% for the same periods.
On a month-to-month basis, the PCE increased 0.2% in both October and November, while the year-over-year rate sits at 2.8%, a slight uptick from 2.7% in October. The index has played a game of tug-of-war, remaining constricted within a 2.6%-2.8% band since June 2025.
Core PCE (excluding food and energy) also rose 0.2% month-over-month in both months, with the year-over-year rate holding at 2.8%, in line with Reuters’ expectations but still above the Federal Reserve’s 2% target. Despite inflation remaining above the Federal Reserve target, markets suggest that there is a low probability of near-term easing. Estimates provided by Reuters suggest a 97.2% likelihood that the Federal Reserve will leave rates unchanged at its upcoming meeting.
On the Yield Front
Yields inched higher: The two-year advanced 0.6 basis points, the five-year increased 0.9 basis points, and the 10-year climbed 0.8 basis points, while the 30-year stumbled 0.8 basis points.
Fund Flows by Asset Type
At the close of the LSEG Lipper fund flows week ending January 21, 2026, the focus was on staggering outflows within the U.S. Money Market classification. U.S. Money Market Funds recorded a net outflow of $34.9 billion; while the outflow was quite meaningful, the magnitude was notably lower than the $74.7 billion outflow observed in the prior week.
U.S. Equity Funds posted $4.1 billion in net outflows, marking a sharp reversal from the previous week’s $27.8 billion in inflows. The pullback was concentrated in U.S. Large-Cap Funds, which saw $12.9 billion in net outflows, reflecting rising volatility and heightened investor sensitivity amid escalating geopolitical tensions. Despite this backdrop, U.S. Emerging Market Equity Funds continued to attract capital, registering $4.8 billion in net inflows, an acceleration from the $3.0 billion inflow recorded the prior week.
Within fixed income, U.S. Municipal Bonds Funds recorded $993 million in net inflows; however, this represented an approximate 45% decline from the prior week. U.S. Taxable Bond Funds also saw inflows moderate to $5.2 billion, a roughly 35% decrease from the prior week, indicating softer demand across rate-sensitive segments.
Commodity Funds extended their recovery for a second consecutive week, posting $1.6 billion in net inflows, driven primarily by Precious Metals Funds, which benefited from continued strength in gold, silver, and platinum prices.
U.S. Alternatives Funds recorded $527 million in net inflows, while U.S. Mixed-Assets Funds had a net outflow of $477 million.
