Lipper U.S. Weekly FundFlows Insight Report: Funds Suffer Overall Net Outflows Driven By Money Markets, Equities

Lipper’s fund asset groups (including both mutual funds and ETFs) suffered net negative flows of $31.3 billion for the fund-flows trading week ended Wednesday, July 1. The net outflows were attributable to money market funds (-$28.0 billion) and equity funds (-$10.0 billion). Money market funds have had net money leave for seven consecutive weeks while equity funds have suffered net outflows in nine of the last 10 weeks. Conversely, bond funds continued to attract net new money. Taxable bond funds (+$5.6 billion) and municipal bond funds (+$1.1 billion) had net-positive flows for the twelfth and eighth consecutive weeks, respectively.

Market Overview

The major equity indices all recorded positive results for the fund-flows trading week as the Nasdaq Composite Index, S&P 500 Index, and the Dow Jones Industrial Average appreciated 2.5%, 2.2%, and 1.1%, respectively. This week’s performance numbers capped a banner second quarter for the indices as they bounced back from the COVID-19 induced slump from Q1. For Q2, the Nasdaq grew 30.6% (its best quarter since Q4 1999 [+48.2%]), the Dow was up 17.8% (its highest return since the Q1 1987 [+21.6%]), and the S&P 500 appreciated 20.0% (its largest return since Q4 1998 [+20.9%]).

The market’s strength this week came from continued support from the central bank and upbeat economic data which gave investors hope that the economy was on the mend despite the recent surge in positive coronavirus tests. In Congressional testimony, Federal Reserve Chairman Jerome Powell stated that the Fed’s main goal was to use all of the tools at its disposal to help the millions of Americans who lost their jobs due to the COVID-19 pandemic get back to work. The minutes from the Fed’s June meeting also provided further insights along these lines. The minutes showed that the Fed is committed to keeping interest rates at their current level (the current range for the federal funds rate is 0.00% to 0.25%) until at least 2022. In addition, the minutes indicated that the Fed is continuing to seek innovative ways to provide more stimulus to the economy now that the interest rate cuts option has been exhausted. The Fed did not expect to have any new concepts ready to be unveiled at its July meeting, but its following meeting in September is a possibility.

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William K. 4 months ago Member's comment

"Central Bank Support" is not going to benefit the rest of the world, or just our nation. It will fuel inflation.