A flight deck crew operator prepares an F-18 jet to take off from the USS Theodore Roosevelt, as the aircraft carrier participates in Rim of the Pacific (RIMPAC) military exercises, in waters south of the Hawaiian Islands, U.S., July 12, 2026. REUTERS/Marco Garcia
Index Performance
U.S. broad-based equity indices were mixed for the week. The Nasdaq (+0.61%) and S&P 500 Total Return Index (+0.52%) posted modest gains, while the Dow Jones Industrial Average fell 0.79%, and the Russell 2000 dipped 1.04%. The results point to a market in which gains were concentrated in a handful of large-cap names, while small cap and blue-chip names lost ground.
Broad-based fixed income indices closed the week in a sea of red. The FTSE U.S. Broad Investment Grade Bond Total Return Index posted the largest decline, falling 0.56%, while the FTSE Municipal Tax-Exempt Investment Grade Bond Index slipped 0.33%. The FTSE High Yield Total Return index dipped 0.12%.
Macro Viewpoint
The brief period of calm in the Middle East proved short lived. The U.S.-Iran ceasefire unraveled after renewed military strikes and attacks on tankers in the Strait of Hormuz reignited tensions, prompting retaliatory action from both sides. While conversations are still ongoing surrounding ending the conflict entirely, the markets reacted by repricing geopolitical risk as concerns rose, lifting crude oil prices.
Despite the renewed escalation, investor sentiment has remained remarkably resilient. Given this tug-of-war tension between the two countries, investors were able to ignore the noise, sending markets to new heights. Although higher energy prices and potential supply distributions could further exacerbate an already tense inflationary environment, this week’s fund flows indicate that investors continued to view geopolitical shocks as tactical risk rather than catalysts for a substantial shift away from equites.
On the Yield Front
Yields climbed higher, driven by rising geopolitical conflict between the U.S. and Iran. The two-year and five-year Treasury yields jumped 4 basis points (bps), while the 10-year climbed 3 bps.
Fund Flows by Asset Type
For the LSEG Lipper Flows week ending July 8, 2026, investors appeared unfazed by elevated geopolitical tensions, propelling the fund universe to a robust $50.2bn in net inflows. Equities captured the lion’s share of investors’ demand as investors continued to embrace risk assets despite increasingly uncertain geopolitical tensions.
The equity universe faced an inflow of $30.3bn, with investors broadly embracing risk across nearly every corner of the market. Nearly every equity classification faced favorable inflows except for Developed Global Markets, Emerging Markets, and U.S. Mid-Cap, which lost momentum and ended the week in negative territory. U.S. Sector Equity Funds took in an impressive $12.7bn in net inflows, extending their winning streak for the second week. U.S. Large-Cap Funds raked in $10.7bn, driven by Large-Cap Growth Funds, which recorded $5.6bn in net flows. Continuing with market-cap specific strategies, U.S. Multi -Cap Funds recorded $4.3bn, while U.S. Small-Cap Funds recorded a high of $1.8bn. On the opposite end, U.S. Mid-Cap Funds ended the week with a net outflow of $691m.
The fixed universe pulled in $16.9bn, with the golden goose–high grade shorts, leading the race for the seventh consecutive week. U.S. Short/Intermediate Investment Grade pulled in $5.8bn, with U.S. General Domestic Taxable Funds close behind at $2.9bn. U.S. Short/Intermediate Government & Treasury Funds added $3.7bn, and U.S. Government & Treasury Funds added $2bn. U.S. High Yield Funds fell from grace, but still landed in positive territory with a marginal positive inflow of $220m. U.S. World Income and U.S. Alternative Bond Funds posted $622m and $160m, respectively, while EM Debt served as the only laggard with an outflow of $160m. Municipals posted favorable gains, with $1.3bn in net inflows.
Money Market Funds posted a modest $3bn in net flows, a sharp slowdown from the prior week’s $46.8bn gain. The deceleration was expected as investors shifted capital into other asset classes, with equity funds receiving the bulk of the new inflows.
Commodities continue their downward spiral, ending the period down $606m, recording their third week of outflows. Mixed Assets bled $367m, while Alternatives showed little signs of life with a slight gain of $11.8m.
