Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the eighth week in a row, injecting a net $20.6 billion for Refinitiv Lipper’s fund-flows week ended Dec. 8, 2021.

Fund investors were net purchasers of money market funds (+$14.2 billion), taxable bond funds (+$7.0 billion), and tax-exempt fixed income funds (+$804 million), while being net redeemers of equity funds (-$1.5 billion) for the week.

Market Wrap-Up

Market volatility was on a roll during the fund-flows week as investors recovered from Omicron-related jitters from the week before while still keeping a keen eye on inflation, supply chain disruptions, and the Federal Reserve’s messaging around tapering.

The broad-based indices remarkably closed the week within striking distance of new highs after witnessing a sharp decline after investors processed a lower-than-expected November nonfarm payrolls report, which led to the Nasdaq declining 1.9% on the day.

On the domestic side of the equation, the prior week’s pariah—the Russell 2000 Price Only Index (+5.79%)—posted the strongest returns of the broadly followed U.S. indices for the fund-flows week as investors scooped up deeply out-of-favor issues. It was followed by the Dow Jones Industrial Average Price Only Index (+5.09%).

The Nasdaq Price Only Index (+3.49%) was the relative laggard for the week. Overseas, the Nikkei 225 Price Only Index (+2.46%) chalked up the strongest performance of the often-followed broad-based international indices, while the Xetra DAX Total Return Index (+1.37%) was the group straggler.

On Thursday, Dec. 2, the Dow posted its largest one-day point gain in a year, rising 618 points as investors attempted to shake off concerns of the Omicron variant of COVID-19, snapping a two-day skid as investors hoped Omicron would be more benign than originally expected.

Although, Fed Chair Jerome Powell kept investors on their toes after he brought up for the second day in a row the prospect of tapering sooner rather than later, which sets the stage for earlier-than-expected interest-rate hikes.

All three major U.S. stock indices lost ground on Friday, Dec. 3, after investors assessed a weaker-than-expected November nonfarm payrolls report. The Department of Labor reported that the U.S. economy added just 210,000 jobs in November, missing analyst expectations of 573,000. However, it wasn’t low enough for analysts to consider that the Fed might slow down its accelerated taper timeline.

In the report, the so-called labor force participation rate edged up to 61.8% and the jobless rate declined to 4.2% from 4.6% in October, hitting a new pandemic low. Nonetheless, the 10-year Treasury yield tumbled nine basis points (bps) to end the day at 1.35%. And near-month crude oil futures declined to $66.26 per barrel (bbl), witnessing its sixth consecutive week of declines.

Omicron worries declined on Monday, Dec. 6, pushing the Dow to its biggest one-day point gain in more than a year after Dr. Anthony Fauci suggested that the Omicron variant might be less severe than initially feared.

The People’s Bank of China might have also contributed to improved investor sentiment after it cut the country’s reserve requirements for banks to help stimulate its economy. The 10-year Treasury yield rose eight bps on the day to close at 1.43%. Front-month crude oil futures rose 4.9% to settle at $69.49/bbl.

The Nasdaq—jumping 3% for the day—led the U.S. indices higher on Tuesday, Dec. 7, as Omicron fears continued to fade. The Dow rose 1,139 points over the last two trading days, climbing 492.4 points on the day.

Information technology and energy issues, both taking the biggest beatings in the prior weeks, witnessed some of the largest gains as investors appeared to buy the dip despite news of Russia’s build-up of troops along the Ukraine border. Both front-month crude oil prices and the 10-year Treasury yield rose for the day, closing at $72.05/bbl and 1.48%, respectively.

After Pfizer (PFE) and BioNTech (BNTX) reported that a third dose of their COVID-19 vaccine neutralized the Omicron variant in laboratory tests, the markets witnessed a third day of gains, helped by investors’ continued bargain hunting in the wake of the Omicron selloff.

The rally, though, was a bit more subdued ahead of the U.S. Consumer Price Index report due this Friday. The 10-year yield rose another four bps to end the day at 1.52%, while crude oil futures closed at a two-week high of $72.36/bbl.

Exchange-Traded Equity Funds

Equity ETFs witnessed their tenth consecutive week of net inflows—taking in $7.1 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$7.4 billion), injecting money also for the tenth week in a row. However, for the second straight week, nondomestic equity ETFs witnessed net outflows, handing back $328 million this past week.

Large-cap ETFs (+$8.7 billion) attracted the largest draw of net new money, followed by sector financial/banking ETFs (+$1.4 billion) and sector utilities ETFs (+$470 million). Meanwhile, small-cap ETFs (-$1.8 billion) suffered the largest net redemptions of the equity ETF macro-groups for the flows week.

iShares Core S&P 500 ETF (IVV, +$4.3 billion) and SPDR S&P 500 ETF (SPY, +$1.5 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, iShares Russell 2000 ETF (IWM, -$1.3 billion) experienced the largest individual net redemptions, and Invesco QQQ Trust 1 ETF (QQQ, -$1.0 billion) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the eighth week in nine, taxable fixed income ETFs witnessed net inflows, attracting $7.7 billion this last week. APs were net purchasers of government-Treasury ETFs (+$5.1 billion), corporate high yield ETFs (+$1.0 billion), and corporate investment-grade ETFs (+$767 million), while being net redeemers of government-mortgage ETFs (-$86 million) and corporate high-quality ETFs (-$14 million). 

iShares 20+ Year Treasury Bond ETF (TLT, +$3.2 billion) and iShares iBoxx $ High Yield Corporate Bond ETF (HYG, +$1.1 billion) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, Invesco Senior Loan ETF (BKLN, -$357 million) and SPDR Portfolio Intermediate Term Corporate ETF (SPIB, -$310 million) handed back the largest individual net redemptions for the week.

For the second consecutive week, municipal bond ETFs witnessed net inflows. These, however, were minimal, with investors injecting just $25 million this week. iShares Short-Term National Muni Bond ETF (SUB, +$166 million) and SPDR Nuveen Bloomberg High Yield Municipal Bond ETF (HYMB, +$18 million) witnessed the largest draws of net new money of the municipal bond ETFs in the subgroup for the week.

Conventional Equity Funds

Conventional fund (ex-ETF) investors were net sellers of equity funds for the ninth week in a row—redeeming $8.5 billion—despite the macro-group recording a market gain of 3.98% for the fund-flows week.

Domestic equity funds, suffering net redemptions of slightly less than $9.9 billion, witnessed their twenty-fourth consecutive week of net outflows while experiencing a 4.32% market gain on average for the fund-flows week. Nondomestic equity funds—posting a 3.20% weekly return on average—observed their fourth straight week of net inflows, taking in $1.4 billion.

On the domestic equity side, fund investors were net redeemers of large-cap funds (-$6.4 billion) and small-cap funds (-$1.8 billion). Investors on the nondomestic equity side were net purchasers of international equity funds (+$1.5 billion) and net redeemers of global equity funds (-$94 million) for the week. 

American Funds International Growth & Income Fund, R6 Shares (RIGGX, +$1.0 billion) and American Funds SMALLCAP World Fund, R6 Shares (RLLGX, +$533 million) attracted the largest amounts of net new money of all individual equity funds for the week.

Conventional Fixed Income Funds

For the third week in a row, taxable bond funds (ex-ETFs) witnessed net outflows—handing back $682 million this past week—while posting a 0.65% gain on average for the fund-flows week.

Investors were net purchasers of flexible funds (+$2.2 billion), corporate high yield funds (+$222 million), and government-Treasury funds (+$147 million) while being net redeemers of corporate investment-grade debt funds (-$2.2 billion) and balanced funds (-$713 million). 

First Eagle Global Fund, I Shares (SGIIX, +$1.5 billion) and First Eagle Global Fund, A Shares (SGENX, +$754 million) took in the largest amounts of net inflows of all individual taxable fixed income funds during the week.

The municipal bond funds group posted a 0.01% loss on average during the week but witnessed its fifth week of net inflows in six, attracting $779 million this week. High Yield Municipal Debt Funds (+$674 million) and General & Insured Municipal Debt Funds (+$242 million) experienced the largest net inflows of the group, while Short Municipal Debt Funds (-$217 million) suffered the largest net redemptions. 

Invesco Rochester Municipal Opportunities Funds, Y Shares (ORNYX, +$142 million) and Nuveen High Yield Municipal Bond Fund, I Shares (NHMRX, +$139 million) took in the largest draws of net new money of the individual tax-exempt fixed income funds for the week.