U.S. Weekly FundFlows Insight Report: Capital Flows From Sidelines To Playing Field As U.S. Enters Earnings Season

Investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the first week in the last 10 as they withdrew $14.0 billion out of the market during Refinitiv Lipper’s U.S. fund-flows week ended April 14, 2021.

Money market funds (-$27.8 billion) were the sole driver of redemptions. Taxable bond (+$9.1 billion), tax-exempt bond (+2.3 billion), and equity (+$760 million) funds all attracted net inflows over the trailing five trading days. The past fund-flows week marks the first time in nearly six months where we have seen back-to-back weeks of outflows from money market funds. The total net outflows of $27.8 billion is the macro-group’s largest outflow since December 2020.

Market Wrap-Up

Refinitiv Lipper’s fund-flows week ended with weekly gains among all U.S. broad-based indices as well as the Dax 30 and FTSE 100. The technology, growth-oriented Nasdaq was the largest gainer, posting a 1.23% weekly return. The small-cap focused Russell 2000 finished the week right behind, appreciating 1.11%. The Treasury yield curve flattened slightly over the course of the week as longer-dated yields (seven-, 10-, 30-year) all fell, while the two-, three-, and five-year yields rose.

On Thursday, April 8, Federal Reserve Chair Jerome Powell stated in a speech to the International Monetary Fund (IMF) that even though U.S. economic recovery is strong, the U.S. is far from meeting the Fed’s full employment mandate. “The unemployment rate in the bottom quartile is still 20%,” Powell said. He reiterated the Fed’s easy monetary policy and support of the market in order to “avoid a great deal of scarring.” The reaction from the U.S. equity markets was positive on Thursday, led by the Nasdaq (+1.03%). The 10-year Treasury yield cooled off, falling 1.33% on the day. The calendar week ended on Friday, with the Dow and S&P 500 once again setting all-time highs. The S&P 500 recorded its nineteenth day posting a record high in 2021, and its fifth time in the last six sessions. The market appears to have accepted the Fed’s stance that any price jump is temporary—equity markets surged even as the Producer Price Index (PPI) rose 1%, which was more than expected.

On Monday, April 12, markets traded flat as investors regrouped before the upcoming earnings season. All forecasts are predicting large earnings growth. Refinitiv Proprietary Research forecasts 25% year-over-year Q1 earnings growth as well as 8.8% year-over-year Q1 revenue growth for S&P 500 companies. The IMF also upgraded its global GDP growth rate expectations to the highest level in decades. The accommodative monetary policy paired with positive earnings growth expectations might lead to a slight reversal in the flows trend from growth to value. Nasdaq was the big winner Tuesday, April 13, gaining 1.05% on the day. Overall equity markets seemed unphased despite the Consumer Price Index (CPI) jumping 2.6% year-over-year, according to the Department of Labor. Although 2.6% is a staggering number, it’s important to note the base effect—a year ago the global economy entered lockdown and prices became suppressed across the board. Refinitiv Lipper’s fund-flows week ended Wednesday, April 14, as the new earnings season began. JPMorgan Chase, Goldman Sachs, and Wells Fargo all beat analyst expectations, driving the DJIA’s outperformance over the S&P 500 and NASDAQ for the day.

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