U.S. Weekly FundFlows Insight Report: Despite New Market Highs, Fund Investors Shun Equities During The Fund-Flows Week

Despite a red-hot stock market, for the fourth week in a row, investors were overall net redeemers of fund assets (including those of conventional funds and ETFs), withdrawing $36.9 billion for Refinitiv Lipper’s fund-flows week ended September 2, 2020. Fund investors were net purchasers of taxable fixed income funds (+$12.3 billion) and municipal bond funds (+$139 million) while being net redeemers of equity funds (-$8.0 billion) and money market funds (-$41.3 billion) this week.

Market Wrap-Up

U.S. markets hit new record highs during the fund-flows week after Wall Street recorded its strongest August return in decades as positive economic data, the Federal Reserve’s assertion that it will no longer preemptively hike interest rates to keep inflation at bay, and vaccine hopes kept some investors engaged.

On the domestic side of the equation, the Nasdaq Composite Price Only Index (+3.36%) witnessed the strongest plus-side return for the fund-flows week of the broadly followed U.S. indices, while the Russell 2000 Price Only Index (+2.06%) was the group’s relative laggard. Overseas, the Shanghai Composite Price Only Index (+3.24%) once again chalked up the largest plus-side return of the often-followed broad-based global indices, while the FTSE 100 Price Only Index (-0.90%) suffered the largest decline.

On Thursday, August 27, equities witnessed small gains as investors assessed the implications of the Fed’s new policy shift. Federal Reserve Board Chair Jerome Powell outlined a new policy in which the Fed would allow employment and inflation to run higher than in the past, permitting inflation to rise over the target rate of 2.0% before hiking rates. The 10-year Treasury yield rose five basis points (bps) to 0.74%, its highest close since June 17. Keeping a lid on gains, first-time jobless claims for the week prior came in at 1.01 million in line with expectations, while continuing claims declined slightly to 14.5 million. However, on Friday, August 28, the Dow erased its year-to-date losses, while the Nasdaq and S&P 500 closed at new highs on the day after data showed that U.S. personal income rose 0.4% in July and consumer spending rose 1.9%, both beating analyst expectations.

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