U.S. Weekly FundFlows Insight Report: Investors Take Their Foot Off The Flows Pedal For The Week

Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the second consecutive week, injecting a net $2.1 billion for Refinitiv Lipper’s fund-flows week ended August 4, 2021. Fund investors were net purchasers of equity funds (+$2.0 billion), tax-exempt fixed-income funds (+$1.2 billion), and taxable bond funds (+$320 million) while being net sellers of money market funds (-$1.4 billion) for the week.

Market Wrap-Up

The U.S. broad-based indices waxed and waned during the fund-flows week, ending mixed as investors weighed the results of a strong corporate earnings season against concerns over the rising cases of the delta variant of the coronavirus, China’s regulatory crackdown on tech stocks, probability of the Federal Reserve tapering its bond purchases sooner than expected, and increasing inflationary concerns.

Early in the fund-flows week, U.S. stocks lost some ground as investors evaluated the rise in COVID-19 cases and after Amazon reported Q2 earnings that missed analyst expectations. On the domestic side of the equation, the Nasdaq Composite Price Only Index (+0.12%) witnessed the largest plus-side returns of the other broadly followed U.S. indices for the fund-flows week. It was followed by the S&P 500 Price Only Index (+0.05%). The Russell 2000 Price Only Index (-1.29%) witnessed the largest declines for the week. Overseas, the Shanghai Composite Price Only Index (+4.09%) experienced the largest positive returns of the often-followed broad-based global indices, while the Nikkei 225 Price Only Index (+0.52%) was the relative laggard.

On Thursday, July 29, 2021, U.S. stocks ended higher as investors shook off lower-than-expect Q2 gross domestic product data which showed the U.S. economy grew at an annualized pace of 6.5%, missing analyst expectations of 9.1%. They focused instead on the upbeat corporate earnings season and news that the Department of Labor showed first-time jobless claims declined 24,000 from the prior week to 400,000. Stocks closed down marginally on Friday, July 30, as Hong Kong’s Hang Seng Index posted its steepest weekly decline since February, investors learned the PCE price index—the Fed’s preferred measure of pricing pressure—rose a sharp 0.5% for the month of June, and after the final reading of the University of Michigan’s consumer-sentiment index fell to 81.2 in July from 85.5 in June. Despite rising inflationary concerns, the 10-year Treasury yield closed down four basis points (bps) on the day to 1.24%.

Once again stocks experienced declines on Monday, August 2, on growing concerns over the spread of the delta variant of the coronavirus and on China’s continuing efforts to crack down on tech firms domiciled in the People’s Republic. Market declines were moderated by the news that the Institute of Supply Management manufacturing index while falling to 59.5 in July from 60.6, was well within expansion territory. However, concerns over the increasing caseload caused by the delta variant and a possible slowdown in consumption led to a 3.6% decline in near-month crude oil futures, which closed at $71.26 per barrel (bbl). On Tuesday, August 3, stocks ended higher after choppy trade early in the day, with the S&P 500 closing at a new high (its forty-second record close for 2021). Despite news that the seven-day average of new coronavirus cases surpassed the peak seen last summer, according to CDC Director Dr. Rochelle Walensky, investors appeared to warm to the news that U.S. factory orders increased 1.5% in June on strong demand for airplanes, oil, and industrial goods. Nonetheless, the 10-year Treasury yield sank to its lowest closing value (+1.19) since February 11, 2021. On Wednesday, August 4, the Dow closed down 324 points after Federal Reserve Vice Chair Richard Clarida made a case for a possible slowing of the Fed’s large-scale bond purchases later this year and interest rate hikes in 2023. In other news, the July ISM services index rose for the fourteenth consecutive month to 64.1 (a record high), while an ADP report showed the U.S. private-sector job creation fell in July to 330,000, missing analyst expectations of 653,000.

Exchange-Traded Equity Funds

Equity ETFs witnessed their second week of net inflows—attracting $2.8 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$924 million), injecting money also for the second week in a row. For the sixth week in a row, nondomestic equity ETFs witnessed net inflows, attracting $1.9 billion this past week. iShares Core MSCI EAFE ETF (IEFA, +$806 million) and KraneShares CSI China Internet ETF (KWEB, +$697 million) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Invesco QQQ Trust 1 ETF (QQQ, -$735 million) experienced the largest individual net redemptions, and Financial Select Sector SPDR ETF (XLF, -$562 million) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the second week in a row, taxable fixed income ETFs witnessed net inflows, taking in $494 million this last week. APs were net purchasers of government-Treasury ETFs (+$2.1 billion), flexible ETFs (+$344 million), and international & global debt ETFs (+$188 million) while being net redeemers of corporate high yield ETFs (-$1.4 billion) and corporate investment-grade debt ETFs (-$750 million). iShares 7-10 Year Treasury Bond ETF (IEF, +$957 million) and iShares 20+ Year Treasury Bond ETF (TLT, +$770 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares iBoxx $ High Yield Corporate Bond ETF (HYG, -$1.3 billion) and iShares iBoxx $ Investment-Grade Corporate Bond ETF (LQD, -$631 million) handed back the largest individual net redemptions for the week. For the twenty-third week in a row, municipal bond ETFs witnessed net inflows, taking in $122 million this week. iShares Short-Term National Municipal Bond ETF (SUB, +$131 million) witnessed the largest draw 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 redeemers of equity funds for the sixth consecutive week—withdrawing $814 million this week—with the macro-group recording a 0.36% market gain for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly less than $4.3 billion, witnessed their sixth consecutive weekly net outflows while experiencing a 0.03% gain on average for the fund-flows week. Nondomestic equity funds—posting a 1.11% weekly gain on average—observed their fifth consecutive week of net inflows, taking in $3.5 billion this past week. On the domestic equity side, fund investors shunned large-cap funds (-$2.5 billion) and small-cap funds (-$1.4 billion). Investors on the nondomestic equity side were net purchasers of international equity funds (+$3.3 billion) and global equity funds (+$186 million).

Conventional Fixed Income Funds

For the first week in five, taxable bond funds (ex-ETFs) witnessed net outflows—though they handed back just $174 million this past week—while posting a 0.23% gain for the fund-flows week. Investors were net purchasers of flexible funds (+$626 million), corporate investment-grade debt funds (+$386 million), and corporate high-yield funds (+$261 million) while being net redeemers of international & global debt funds (-$999 million) and government-Treasury funds (-$239 million). The municipal bond funds group posted a 0.12% gain on average during the week and witnessed its eighteenth straight week of net inflows, attracting $1.1 billion this week. High Yield Municipal Debt Funds (+$478 million) experienced the largest net inflows of the group, followed by Short Municipal Debt Funds (+$186 million).

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