U.S. Weekly FundFlows Insight Report: Conventional Fund, ETF Investors Shun Equities Over Rising Inflationary Concerns

Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the second week in a row. They injected a net $25.8 billion for Refinitiv Lipper’s fund-flows week ended May 19, 2021. Fund investors were net purchasers of money market funds (+$25.2 billion), taxable bond funds (+$3.4 billion), and tax-exempt fixed-income funds (+$725 million) while being net sellers of equity funds (-$3.5 billion) for the week.

Market Wrap-Up

For the fund-flows week, returns for the broad-based U.S. indices were generally on the plus side as investors weighed inflationary concerns and stretched valuations for equities against strong earnings reports from retailers during the fund-flows week. Equity markets remained volatile during the week as investors awaited the release of the April Federal Open Market Committee meeting notes. On Wednesday, May 19, these notes highlighted the emerging debate among members concerning inflationary risks and when the Fed should begin reducing its asset purchases.

Despite a roller coaster ride for stocks, on the domestic side of the equation, the Russell 2000 Price Only Index (+2.74%) witnessed the strongest plus-side returns of the other broadly followed U.S. indices for the fund-flows week, followed by the NASDAQ Composite Price Only Index (+2.06%). The Dow Jones Industrial Average Price Only Index (+0.92%) witnessed the smallest gains for the week even after tech shares came under pressure and a few big retailers reported better-than-expected Q1 earnings during the week. Overseas, the Shanghai Composite Price Only Index (+1.46%) posted the strongest returns of the other often-followed broad-based global indices, while the FTSE 100 Price Only Index (-0.44%) witnessed the only decline.

On Thursday, May 13, 2021, the Dow snapped a three-day losing streak after investors learned that first-time jobless claims declined to a pandemic low of 473,000 for the week prior. Oil prices declined some 3.5% after Colonial Pipeline announced it had resumed operations after closing them due to a ransomware attack. U.S. stocks closed higher on Friday, May 14, despite a weaker-than-expected reading of April retail sales, which came in unchanged, missing analyst expectations of a 0.8% increase. Also, an April import price index showed a 10.6% rise over the past year, fanning inflationary concerns.

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