Photo by Kevin Mueller on Unsplash 

During Refinitiv Lipper’s fund-flows week that ended April 5, 2023, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the sixth week in a row, adding a net of $24.5 billion.

Money market funds (+$27.8 billion) and taxable bond funds (+$5.3 billion) recorded inflows, while equity funds (-$8.5 billion) and taxable bond funds (-$92 million) suffered outflows.

Index Performance

At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices reported mostly positive returns. The DJIA (+2.34%), Nasdaq (+0.59%), and S&P 500 (+1.55%) all reported gains while the Russell 2000 (-1.10%) realized a weekly loss.

The Bloomberg Municipal Bond Total Return Index (+0.95%) and the Bloomberg U.S. Aggregate Bond Total Return Index (+1.82%) logged weekly gains. This was the fifth straight week in the black for the Bloomberg Municipal Bond Total Return Index.

Overseas indices traded in the plus territory—Shanghai Composite (+2.35%), Dax TR (+2.00%), FTSE 100 (+2.46%), and Nikkei 225 (+0.99%).

Rates/Yields

The 10-two Treasury yield spread remained negative (-0.50), marking the one hundred and ninety-seventh straight trading session with an inverted yield curve.

According to Freddie Mac, the 30-year fixed-rate average (FRM) decreased for the fourth consecutive week—currently at 6.28%. The United States Dollar Index (DXY, -0.77%) fell slightly, while the VIX (+0.16%) fell over the course of the week.

Market Recap

Our fund-flows week kicked off on Thursday, March 30, with the Bureau of Economic Analysis (BEA) reporting real gross domestic product (GDP) increased at an annual rate of 2.6% during the fourth quarter of 2022, marking the second straight quarter of growth following a 3.2% increase in the third quarter. According to the BEA, fourth-quarter economic growth was primarily due to increases in inventory investment as well as consumer spending. The Department of Labor reported, for the week ending April 1, seasonally adjusted initial claims of unemployment were 228,000—marking a decrease of 18,000 from the prior week’s level. The four-week moving average was 237,750, also a decrease (-4,250) from the prior week’s moving average. The two-year Treasury yield (+0.47%) increased, while the 10-year yield (-0.42%) fell on the day. Equity markets traded mostly in the black—Nasdaq (0.73%), S&P 500 (+0.57%), DJIA (+0.43%), and Russell 2000 (-0.18%).

The calendar week ended Friday, March 31, with the Department of Commerce releasing February’s Personal Consumption Expenditures (PCE) Price Index. The data showed that headline PCE rose 0.3% from January and up 5.0% year-over-year. Core-PCE, the Federal Reserve’s preferred gauge of inflation, was also up 0.3% from the prior month while seeing a 4.6% increase over the trailing 12 months—both figures were less than the previous month’s levels and below economists’ estimates. The University of Michigan consumer sentiment index observed its first decline in four months. All five components of the index fell, led by the one-year business conditions component as an increasing number of consumers forecast a recession. Equity markets surged on the day—Russell 2000 (+1.93%), Nasdaq (+1.74%), S&P 500 (1.44%), and DJIA (+1.26%).

On Monday, April 3, the Institute of Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) fell to 46.3%—a 0.14% decrease from February and the lowest level since May 2020. The new orders index dropped from 47% to 44.3%—a level below 50% indicates contraction. Siân Jones, a senior economist at S&P Global Market Intelligence, said, “The US manufacturing sector continued to signal concerning trends during March…inflationary concerns weighed on business confidence once again amid pressure on margins.” Treasury yields fell on the day led by the five- (-2.01%) and seven-year (-1.94%) yields. Equity markets traded mixed on the day—DJIA (+0.98%), S&P 500 (+0.37%), Russell 2000 (-0.01%), and Nasdaq (-0.27%).

On Tuesday, April 4, the Bureau of Labor Statistics published its latest Job Openings and Labor Turnover Survey (JOLTS), showing a 0.4% (632,000) decrease in nonfarm job openings month over month. The largest attributor to the decrease in openings according to the report was in professional and business services—falling 1.0% (278,000). General Motors (GM) reported that 5,000 workers opted in for a “Voluntary Separation Program” (VSP) that was put in place to accelerate the attrition curve and help the company meet its goal of cutting expenses by $2 billion by year’s end. Both equity markets and Treasury yields fell on the day, led by the Russell 2000 (-1.81%) and five-year Treasury yield (-3.41%).

Our fund-flows week wrapped up Wednesday, April 5, with payroll provider ADP releasing its National Employment Report showing that the private sector added 145,000 jobs from last month, but significantly fewer than the 261,000 added in February. ADP also noted that growth in wages decelerated from those who stayed in their jobs to 6.9% (from March’s 7.2%). Wage growth from job movers rose month over month, from 14.2% to 14.4%. Equity markets traded mostly down while Treasury markets fell for the fourth straight session.

Exchange-Traded Equity Funds

Exchange-traded equity funds recorded $2.6 billion in weekly net outflows, marking the third weekly outflow in the last four weeks. The macro-group posted a gain of 1.30% on the week.

Growth/value-large cap ETFs (-$3.4 billion), growth/value-small cap ETFs (-$1.6 billion), and sector-financial/banking ETFs (-$1.2 billion), were the top subgroups to log outflows. Despite logging three straight weeks of gains, growth/value-large cap ETFs suffered their third outflow over the last four weeks and eleventh over the prior 14.

Sector-other ETFs (+1.1 billion), international equity ETFs (+$758 million), and sector-technology ETFs (+$728 million) were the largest outflows under the macro-group. After realizing four straight weeks of positive returns, sector-other ETFs attracted their second-largest weekly inflow of the year.

Over the past fund-flows week, the top two equity ETF flow attractors were Invesco QQQ Trust 1 (QQQ, +$1.9 billion) and Select Sector: Energy SPDR (XLE, +$819 million).

Meanwhile, the bottom two equity ETFs in terms of weekly outflows were SPDR S&P 500 ETF (SPY, -$3.6 billion) and iShares: Core S&P 500 (IVV, -$1.9 billion).

Exchange-Traded Fixed Income Funds

Exchange-traded fixed income funds observed a net $6.1 billion weekly inflow—the macro-group’s seventh straight weekly inflow. Fixed income ETFs reported a weekly return of positive 1.27% on average, their third weekly gain in four.

Corporate-investment grade ETFs (+$3.2 billion), corporate-high yield ETFs (+$2.9 billion), and flexible funds ETFs (+$605 million) logged the top weekly inflows under taxable fixed income subgroups. Corporate-investment grade ETFs have reported four weeks of positive returns in five while pulling in their largest weekly inflow of the year—the largest since October 2022.

International & global debt ETFs (-$446 million), government-mortgage ETFs (-$93 million), and corporate-high quality ETFs (-$39 million) were the top subgroups to observe weekly outflows. Despite four straight weeks of positive performance international & global debt ETFs suffered their second weekly outflow in three weeks.

Municipal bond ETFs reported a $305 million inflow over the week, marking only their third weekly inflow in the last 11 weeks. The subgroup realized a positive 0.73% average, their fifth straight week of gains.

Schwab Strategy: 5-10 Corporate Bond ETF (SCHI, +$2.7 billion) and iShares: iBoxx $High Yield Corporate Bond ETF (HYG, +$1.8 billion) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.

On the other hand, Schwab Strategy: US TIPS ETF (SCHP, -$1.5 billion) and SPDR Bloomberg Emerging Markets Local Bond (EBND, -$542 million) suffered the largest weekly outflows under all taxable fixed income ETFs.

Conventional Equity Funds

Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$5.9 billion) for the sixty-first straight week. Conventional equity funds posted a weekly return of positive 1.04%, the third straight week of gains.

International equity (-$2.3 billion), growth/value-large cap (-$1.8 billion), and growth/value-aggressive cap (-$581 million) were the largest subgroup outflows under conventional equity funds. Conventional international equity funds observed their fifth weekly outflow in the last six weeks, despite appreciating in five of the last six weeks.

Convertible & Preferreds (+$7 million) and gold and natural resources (+$4 million) were the only subgroups to post a weekly inflow under equity mutual funds. Convertible & Preferreds realized their second weekly inflow in three weeks after recording four weeks of positive performance in the last five.

Conventional Fixed Income Funds

Conventional taxable-fixed income funds realized a weekly outflow of $855 million—marking their seventh straight outflow. The macro-group logged a positive 1.57% on average—their fifth consecutive week of gains.

Conventional corporate-investment grade funds (-$1.4 billion), balanced funds (-$361 million), and corporate-mortgage (-$298 million) reported the largest weekly outflows under taxable fixed income conventional funds. Corporate-investment grade mutual funds witnessed their sixth straight weekly outflow after logging seven consecutive weeks of inflows. The subgroup logged a positive 1.64% on average over the last week.

Conventional corporate-high yield (+$922 million), government-Treasury & mortgage (+$200 million), and government-Treasury (+$126 million) were the only taxable fixed income macro-group to produce inflows. Corporate-high yield funds attracted their largest total weekly inflow since August 2022, ending seven weeks of consecutive outflows.

Municipal bond conventional funds (ex-ETFs) returned a positive 1.12% over the fund-flows week—their fifth week of gains in six. The subgroup experienced $397 million in outflows, marking the seventh straight week of outflows.

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