For May, Inflation-Focused And Value Plays Attract The Largest Flows For ETFs And Conventional Funds

For the month of May, investors injected some $167.5 billion into the mutual fund business (including conventional funds and ETFs) based on preliminary numbers. However, investors remained on the fence, injecting almost half of that sum into Money Market Funds (+$84.81 billion).

Of the long-term assets, all three asset classes attracted net new money in May, with equity funds attracting $41.1 billion, taxable bond funds taking in $34.6 billion, and municipal bond funds receiving $6.9 billion.

During the month the broad-based U.S. indices hit new record highs but remained range-bound as investors wrestled with the dichotomy between strong Q1 corporate earnings results, a flattening of the Treasury yield curve, and broad reopening of the U.S economy against growing inflationary concerns, labor shortages, and lower than expected April nonfarm payrolls report. The report showed the U.S. economy added just 266,000 jobs in April compared to analysts’ expectation of 755,000. Commodity prices rose for the month, with near-month gold prices gaining 7.65% to close the month at $1,902.50 per ounce and front-month crude oil prices climbing 4.31% to close at $66.32 per barrel.

For the month, out-of-favor issues continued to rally while the stay-at-home and growth stocks were pressured, with the Nasdaq Composite (-1.53%) suffering the only major decline and the NYSE AMEX (+9.49%) composite posting the strongest return, followed by the Dow Jones Industrial Average (+1.93%, which witnessed its twenty-fourth record close for 2021 during the month). Overseas, the Shanghai Composite (+6.72%), the Xetra DAX (+3.48%), and the FTSE 100 (+3.44%) all posted handsome returns for May.

On the equity side, international equity funds (including ETFs) attracted the largest amount of net new money, taking in $19.0 billion, followed by sector-other funds (+$9.6 billion, which is heavy influenced by commodities funds), equity income funds (+$6.0 billion), and sector-financial/banking funds (+$5.9 billion).

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