U.S. Weekly FundFlows Insight Report: Q2 Opening Day: Investors Continue Trend Into Short-Term Assets

On Monday, March 29, the DJIA, S&P 500, and Nasdaq all finished roughly flat, whereas the Russell 2000 took a 2.8% drop. News surfaced Monday surrounding Credit Suisse and Nomura (two global investment banks) suffering potentially “significant” first-quarter blows after a U.S. hedge fund, Archegos Capital Management, defaulted on margin calls over the previous week. This forced an early liquidation of more than $20 billion in its holdings. The two investment banks, who were the primary suppliers of leverage to the hedge fund, will take on an estimated $4-6 billion in losses. On a positive note, the Ever Given—the 1,300-foot container ship blocking the Suez Canal—was finally set free. The massive vessel was holding up an estimated $9.6 billion in global goods each day. On Tuesday, the Russell 2000 erased a portion of the previous day’s losses despite the rest of the U.S. equity markets falling. Refinitiv Lipper’s fund-flows week ended Wednesday on news of President Biden’s $2 trillion infrastructure plan. To fund the significant expenditure, Biden is planning on raising the corporate tax rate from 21% to 28%. Equity indices ended the day mixed and the 10-year Treasury yield increased by 1.23% (closing at 1.75%).

As Q1 ended yesterday, we continued to see fund-flow themes from growth and technology into reopening stocks and financials. Trends also persisted in the positioning of capital to money market funds, international equities, and shorter-term fixed-income funds. Happy Opening Day to the baseball fans out there!

Exchange-Traded Equity Funds

Exchange-traded equity funds realized their eighth straight week of net inflows (+$2.5 billion) and their twenty-third week of positive inflows in the last 25. The rotation trade into financial and energy stocks is certainly prevalent under this subgroup. Sector-financial ETFs led here, seeing inflows of $1.7 billion, and sector-energy ETFs saw $899 million in net inflows. Sector-energy ETFs witnessed their twenty-seventh week in a row of positive inflows. International equity ETFs accounted for the second-largest net inflow in this subgroup (+$1.6 billion) and have not recorded a negative weekly flow all year.

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