For the fund flows week ended July 30th, 2014, the mostly positive quarterly corporate earnings and employment reports news was tempered by mixed new-housing-sales data, geopolitical uncertainty about Russian economic sanctions, and cautious investor sentiment about the upcoming GDP report release on Wednesday. The GDP report indicated stronger-than-anticipated levels of domestic economic growth at 4%, which helped reassure some stock investors. However, the Federal Reserve’s statement later in the day gave others pause because of its mixed outlook for labor markets and inflation. The S&P 500 rose slightly (+0.02%) on Wednesday, but it fell 0.83% for the week, putting its year-to-date gain at 7.81%. The NASDAQ declined 0.23% for the week, putting its 2014 return so far at 6.86%. Small-cap stocks continued to lag, with the Russell 2000 returning minus 0.96% for the week.
With all this news as a backdrop, investors were net buyers (+$7.6 billion) of equity fund assets (including conventional funds and exchange-traded funds [ETFs]) for the week. Taxable bond funds (including ETFs) saw net inflows of $1.2 billion. Money market funds witnessed net outflows of $3.6 billion for the week, and municipal bond funds gained $419 million net.
Equity funds (ex-ETFs) had net outflows (-$302 million), following the previous week’s inflows of $379 million. Equity ETFs, however, witnessed their largest net inflows (+$7.9 billion) since the week ended February 19, 2014. Nondomestic equity mutual funds (excluding ETFs) had positive net flows (+$887 million), while nondomestic equity ETFs also had net inflows (+$1.3 billion) for the fifth week in a row. Domestic equity funds (ex-ETFs) had negative flows (-$1.2 billion) for the third week in a row, while domestic equity ETFs saw net inflows (+$6.6 billion) that were their largest since the week ended March 5, 2014.
Lipper’s Large-Cap Growth Funds classification (excluding ETFs) had its fourteenth consecutive week of net outflows (-$214 million). Large-Cap Value Funds also had a week of negative flows (-$658 million), following the prior week’s positive net flows of $433 million. Emerging Markets Funds experienced positive net flows (+$293 million), reversing the previous week’s modest net outflows (-$45 million). The Real Estate Funds classification (excluding ETFs) experienced its eighteenth consecutive week of net inflows (+$46 million); this asset class continues to remain attractive to income-seeking investors.
Reflecting the net inflows into equity ETFs during the week, SPDR S&P 500 ETF (SPY) had net positive flows of $7.4 billion–its largest weekly inflows since the week ended September 14, 2011. IShares MSCI Emerging Markets (EEM) also had net inflows (+$602 million).
The municipal bond funds macro-group’s (including ETFs) net inflows of $419 million (witnessing inflows for a third consecutive week) were down from the previous week’s inflows of $686 million.
Taxable bond funds (including ETFs) had $1.2 billion of net inflows, with the Barclay’s U.S. Aggregate Bond Index declining 0.37%. (The index has now risen 3.68% so far for 2014.) The bond market experienced losses during the week as the employment picture appeared to brighten; however, muted inflation data and concerns about soft global economic growth rates helped mitigate the declines until Wednesday. Most of the bond price losses coincided with the release of a robust domestic GDP growth figure on Wednesday. The benchmark ten-year Treasury yield began the week at 2.48% and ended it at 2.57%.
Taxable bond fund investors were net buyers of fixed income assets as some investors favored this safe-haven asset class. But loan participation funds including ETFs (-$406 million) witnessed their third consecutive week of net outflows. High-yield funds also saw net outflows (-$1.5 billion) for the third consecutive week as investors appeared concerned about valuations in the corporate bond non-investment-grade segment. Core bond funds had their third week of positive net flows, with $109 million entering the segment.
For more information on this week’s Lipper fund flows data, please refer to Lipper’s U.S. Fund Flows website or this video
