ETF, Mutual Fund Investors Inject Taxable Fixed Income Funds With $8.6 Billion In Cash

Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the eleventh week in 12. They injected a net $29.1 billion for Refinitiv Lipper’s fund-flows week ended April 21, 2021, with the lion’s share attributable to flows into short-term assets. Fund investors padded the coffers of money market funds (+$17.0 billion), taxable bond funds (+$8.6 billion), tax-exempt fixed-income funds (+$1.9 billion), and equity funds (+$1.6 billion) for the week.

Market Wrap-Up

For the fund-flows week, returns for the broad-based U.S. indices were mixed as investors took their foot off the gas pedal. They were wrestling with concerns over an increase in global COVID-19 cases and the good news of a relatively strong beginning to the Q1 corporate earnings seasons. In spite of any concerns, both the DJIA and S&P 500 hit fresh new record highs during the week.

On the domestic side of the equation, the Dow Jones Industrial Average Price Only Index (+1.20%) witnessed the strongest returns of the other broadly followed U.S. indices for the fund-flows week, followed by the S&P 500 Price Only Index (+1.18%). The Russell 2000 Price Only Index (-0.36%) suffered the largest declines for the week. Overseas, the Shanghai Composite Price Only Index (+2.24%) posted the strongest returns of the other often-followed broad-based global indices, while the Nikkei 225 Price Only Index (-3.00%) witnessed the largest declines after Japanese officials considered ordering a state of emergency in Osaka and Tokyo due to a surge in coronavirus cases.

On Thursday, April 15, 2021, the Dow and S&P 500 closed at record highs after the government reported March retail sales leapt 9.8%, beating analyst expectations, and weekly jobless claims declined to a pandemic-level low of 576,000 from 769,000 in the prior week. Stocks got an additional boost from a strong beginning in Q1 corporate earnings reports and a decline in the 10-year Treasury yield to 1.56%—an eight basis-point decline from Wednesday’s close. U.S. stocks witnessed another round of record closes on Friday, April 16, with the Dow and S&P both extending their weekly winning streak to the fourth consecutive week. The nation’s biggest banks reported strong Q1 earnings, and while capacity utilization rose for the month, it remained under the inflation tipping point. Near month crude oil futures fell 33 cents to settle at $66.13/barrel (bbl).

Stocks snapped their three-day winning streak on Monday, April 19, after investors hit the pause button ahead of the onslaught of earnings reports over the next two weeks. Despite the Centers for Disease Control reporting that half of all U.S. adults received at least one COVID-19 vaccination so far, investors appeared to be evaluating what the rising global coronavirus case count and increasing geopolitical concerns in Ukraine might have on the global markets and multi-nationals’ profitability. On Tuesday, April 20, stocks were pressured for yet another day after the World Health Organization warned that the global infection rates were edging toward their highest level in the pandemic, with India and Brazil being hotspots. Oil futures declined on the day to $62.67/bbl on the possible decline in Indian demand.  However, on Wednesday, April 21, the Dow and S&P rose just shy of records and the Russell 2000 gained 2.4% on the day despite India reporting increases in COVID-19 cases for the seventh straight day and Netflix reporting disappointing Q1 earnings results. Oil futures took another hit, declining to $61.35/bbl in anticipation of declining global demand while gold futures rose to a two-month high.

Exchange-Traded Equity Funds

Equity ETFs witnessed their eleventh consecutive week of net inflows—attracting $4.4 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$2.7 billion), injecting money for the seventh week in a row. Nondomestic equity ETFs witnessed net inflows for the eighteenth week running, attracting $1.7 billion this past week. SPDR S&P 500 ETF (SPY, +$2.6 billion) and JPMorgan BetaBuilders Europe ETF (BBEU, +$584 million) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Invesco QQQ Trust 1 ETF (QQQ, -$1.4 billion) experienced the largest individual net redemptions, and ARK Innovation ETF (ARKK, -$645 million) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the fourth week in a row, taxable fixed income ETFs witnessed net inflows, attracting $3.9 billion this last week. APs were net purchasers of corporate investment-grade debt ETFs (+$2.4 billion) and government-Treasury ETFs (+$738 million) while being net redeemers of corporate high-quality ETFs (-$23 million). iShares U.S. Treasury Bond ETF (GOVT, +$812 million) and Schwab Short Term U.S. Treasury ETF (SCHO, +$434 million) attracted the largest amounts of net new money of all individuals taxable fixed income ETFs. Meanwhile, iShares iBoxx $ High Yield Corporate Bond ETF (HYG, -$523 million) and iShares 3-7 Year Treasury Bond ETF (IEI, -$287 million) handed back the largest individual net redemptions for the week. For the eighth week in a row, municipal bond ETFs witnessed net inflows, taking in $319 million.

Conventional Equity Funds

Conventional fund (ex-ETF) investors were net redeemers of equity funds for the third consecutive week, withdrawing $2.9 billion this week, with the macro-group posting a 0.64% market gain for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly more than $3.0 billion, witnessed their seventeenth weekly net outflows while experiencing a 0.77% return on average for the fund-flows week. Nondomestic equity funds—posting a 0.37% weekly gain on average—observed their eleventh consecutive week of net inflows, however, taking in just $163 million this past week. On the domestic equity side, fund investors shunned large-cap funds (-$2.7 billion). Investors on the nondomestic equity side were net purchasers of global equity funds (+$1.8 billion) but were net redeemers of international equity funds (-$1.6 billion).

Conventional Fixed Income Funds

For the third week in a row, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $4.8 billion this past week—while posting a 0.32% gain for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$2.5 billion), balanced funds (+$1.7 billion), and flexible funds (+$907 million) while being net redeemers of corporate high-yield funds (-$1.4 billion) and government-mortgage funds (-$190 million). The municipal bond funds group posted a 0.21% gain on average during the week and witnessed its third straight week of net inflows, attracting $1.6 billion this week. High Yield Municipal Debt Funds (+$669 million) experienced the largest net inflows of the group, followed closely by General & Insured Municipal Debt Funds (+$568 million).

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