Ignoring better-than-expected initial jobless claims reported for the week ended October 9, plus a good start to the unofficial beginning of earnings season, investors bid the S&P 500 Index to a four- week low. The CBOE Volatility Index (VIX) rose to a height not seen since June as the partial government shutdown hit its ninth day. Even the announcement that Janet Yellen was nominated to replace Bernanke as Fed Chief had little impact, although broad-based indices were mainly up for that day. The S&P 500 Daily Reinvested Total Return Index declined 2.17% and the Dow Jones Industrial Daily Reinvested Average lost 2.14%.
For the second week in a row, mutual fund investors ducked for cover and were net redeemers of fund assets (including conventional funds and exchange-traded funds [ETFs]), redeeming a net $26.5 billion. All of Lipper’s major fund macro-classifications suffered net redemptions, with money market funds handing back $19.2 billion net, equity funds witnessing $6.1 billion of net redemptions, Municipal bond funds experiencing net outflows of $729 million, and taxable bond funds with net outflows of $452 million.
Equity ETFs experienced net outflows, handing back almost $6.0 billion. While authorized participants padded the coffers of SPDR S&P MidCap 400 ETF (+$701 million) and iShares Core S&P Mid-Cap Fund (+$439 million), SPDR S&P 500 ETF (-$3.5 billion) and iShares Russell 2000 ETF (-$757 million), suffered net redemptions.
Good news from China: Positive inflows for international funds
Mutual fund (ex-ETF) investors were net redeemers of equity mutual funds at a measly $142 million. Domestic equity funds suffered net redemptions for the third consecutive week, handing back almost $1.6 billion, while nondomestic equity funds took in $1.4 billion. On the domestic side, investors shunned large-cap funds, redeeming $1.1 billion net. On hearing there was an improvement in Chinese data, mutual fund investors injected a net $1.3 billion into international funds.
Taxable bond funds (ex-ETFs) took in $1.0 billion net—for their fifth consecutive week of net inflows. Investors continued to shun government Treasury & mortgage funds, government mortgage funds, and government Treasury funds, redeeming a net $162 million, $467 million, and $144 million, respectively. Despite the Fed’s decision to forego tapering, fixed income investors continued to anticipate rising interest rates. The adjustable-rate loan participation funds group attracted $548 million net while Municipal debt funds (ex-ETFs) handed back some $713 million.
For more information on this week’s Lipper fund flows data, please refer to Lipper’s U.S. Fund Flows website or this video.
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