U.S. Weekly FundFlows Insight Report: Domestic Equity Funds Suffer As New Money Continues To Flood Non-Domestic ETFs

During Refinitiv Lipper’s fund-flows week ended June 2, 2021, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the fourth consecutive week (+$5.7 billion). Money market funds (+$6.5 billion), taxable bond funds (+$2.8 billion), and tax-exempt bond funds (+$997 million) all attracted net inflows while equity funds were hit with $4.6 billion in weekly outflows over the trailing four trading sessions. Domestic equity funds saw $5.7 billion walk out the door as non-domestic equity funds took in $1.1 billion.

Market Wrap-Up

At the close of Refinitiv Lipper’s fund-flows week, both U.S. and overseas broad-based indices logged positive weekly returns. Domestic indices Russell 2000 (+2.16%), DJIA (+0.81%), S&P 500 (+0.29%), and Nasdaq (+0.13%) ended in the black. Overseas, FTSE 100 (+1.45%), DAX 30 (+0.89%), and Shanghai Composite (+0.22%) each realized their fourth consecutive week of positive performance. Year to date, the small-cap-centric Russell 2000 (+16.35%) has outperformed all other broad-based indices. The 10-two Treasury yield spread (+1.19%) and the VIX (+4.36%) rose slightly over the course of the week.

There was certainly no shortage of economic data during the shortened week. On Thursday, May 27, initial jobless claims released by the Department of Labor indicated another decrease to a pandemic-era record low (406,000 vs. 425,000 expected). Continuing claims for the prior week also came in lower than expectations (3.642 million vs. 3.680 million). The Commerce Department kept the first-quarter gross domestic product growth unchanged at 6.4%. The Russell 2000 was the big winner on the day, gaining 1.06%, while the 10-year Treasury yield rose 2.29%.

Friday, May 28, was highlighted by President Joe Biden’s release of his 2022 budget proposal. The two main components of Biden’s proposal are the American Families Plan and the American Jobs Plan. The American Families Plan calls for $1.8 trillion geared toward “human infrastructure” such as affordable childcare, pre-kindergarten assistance, and improved paid leave programs. The American Jobs Plan asks for an estimated $2.3 trillion and centers around physical infrastructure such as bridges, roads, electric vehicle charging stations, and improving internet capabilities. Altogether, the full proposal calls for around $6.0 trillion and would mark the largest amount of federal spending since World War II. Friday also included the release of April’s Personal Income and Outlays Report. The report showed U.S. personal income in April decreased 13.1% from previous month, which comes after March’s 20.9% increase. The drastic differences month over month could be attributed to the most recent round of stimulus checks and continued social benefits. Even with personal income down from March, April still revealed an increase in the Personal Consumption Expenditures (PCE) index (a popular inflation indicator for the Federal Reserve). PCE increased 0.6% from March and 3.6% (+3.1% excluding food and energy) from last April. The month-over-month increase was the largest percentage increase since June 2008. Equity markets traded mixed while Treasury yields fell—led by a 2.61% drop in the three-year yield.

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