Investor interest in U.S. markets faded on Wednesday, June 11th, after the World Bank cut its global growth forecast citing harsh winter weather in the U.S. and the conflict between Russia and Ukraine. Prior to that, the Dow Jones Industrial Average and S&P 500 indices hit record highs on the preceding four trading days. On Tuesday, June 10, the Dow posted its tenth record high for the year, while on Monday, June 9, the S&P 500 witnessed its nineteenth record close of 2014. However, many pundits were quick to point out that most of these record-breaking achievements generally occurred on marginal gains and low volume.
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Investors also cheered the European Central Bank’s unveiling of a spate of stimulus measures and the Labor Department report that indicated the U.S. economy added 217,000 jobs in May, outpacing analysts’ expectations. However, investors remained cautious, weighing the good economic news and market advances against a suspiciously low ten-year Treasury yield that finally jumped above the 2.50% mark during the week. It closed out the week on Wednesday at 2.65%—its highest closing value since May 12.
Amidst all this news, fund investors for a third consecutive week were net purchasers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), injecting $10.0 billion for the week. However, for the fifth consecutive week money market funds witnessed net outflows, to the tune of $1.6 billion. Nonetheless, the remaining fund macro-groups attracted enough net inflows to keep the overall trend on the plus side, with investors padding the coffers of fixed income funds (+$1.2 billion) for the fourteenth week in a row and injecting net new money into equity funds (+$10.0 billion) for a third week in a row. Investors once again were net purchasers of municipal bond funds, which attracted $0.3 billion for a sixth week of net inflows.
For the third consecutive week, equity ETFs witnessed net inflows, taking in $7.6 billion. Wrapped up in the general U.S. market rally, authorized participants (APs) were net purchasers of domestic funds, purchasing $5.6 billion worth from that subgroup, while they injected $2.0 billion net into nondomestic equity funds. iShares Russell 2000 ETF (+$2.7 billion) attracted the largest net draw of all individual ETFs. SPDR S&P 500 ETF (+$1.5 billion) took in the next largest amounts of net new money. WisdomTree Japan Hedged Equity ETF suffered the largest redemptions for the week, handing back a net $494 million, bettered somewhat by iShares U.S. Real Estate ETF’s $413 million.
For the twenty-fifth consecutive week, investors were net purchasers of equity funds (ex-ETFs), injecting a net $2.4 billion into the group. Domestic equity funds, taking in $0.6 billion, witnessed their first week of net inflows in three, while their nondomestic equity fund counterparts took in a little more than $1.8 billion—attracting net new money for a twenty-sixth week in a row. On the domestic side, investors turned their backs on small-cap funds, which witnessed some $0.1 billion of net redemptions. On the nondomestic side, international equity funds took in a net $1.6 billion and emerging markets equity funds attracted some $538 million net.
For the twenty-third week in a row, taxable bond funds (ex-ETFs) attracted net new money, bringing in a little over $1.6 billion for the week. Flexible income funds attracted $0.6 billion—for their twenty-third consecutive week of net inflows. Corporate high-yield debt funds attracted the next largest amount, $0.4 billion net, gaining new money for a fifth week in six. Interestingly, while corporate investment-grade debt funds (+$133 million) took in net new money for the sixth week in a row, a subset of the group—bank loan funds—witnessed net redemptions (-$1.2 billion, the largest net redemptions since the week ended August 17, 2011) as the fear of imminent interest-rate increases faded. Municipal debt funds (ex-ETFs) witnessed net inflows for the sixth week in a row, attracting a net $295 million, despite experiencing a negative return (-0.18%) for a second consecutive week.
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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