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During Refinitiv Lipper’s fund-flows week that ended April 12, 2023, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the seventh week in a row, adding a net of $28.1 billion.

Money market funds (+$25.4 billion), taxable bond funds (+$2.9 billion), and equity funds (+$53 million) recorded inflows, while tax-exempt bond funds (-$256 million) suffered outflows.

Index Performance

At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices reported mostly positive returns. The Russell 2000 (+1.23%), DJIA (+0.49%),  and S&P 500 (+0.04%) all reported gains while the Nasdaq 2000 (-0.56%) realized a weekly loss.

The Bloomberg Municipal Bond Total Return Index (+0.43%) recorded its sixth straight weekly gain, whereas the Bloomberg U.S. Aggregate Bond Total Return Index (-0.53%) logged its first weekly loss in four weeks.

Overseas indices traded mainly in plus territory—the Shanghai Composite (+0.40%), Dax TR (+1.79%), and FTSE 100 (+2.44%) all appreciated, while the Nikkei 225 (-0.86%) ended the week in the red.

Rates/Yields

The 10-two Treasury yield spread remained negative (-0.57), marking the two-hundred and second straight trading session with an inverted yield curve. The two-year Treasury yield rose 4.58% on the week, while the 10-year yield increased by 3.15%.

According to Freddie Mac, the 30-year fixed-rate average (FRM) decreased for the fifth consecutive week—currently at 6.27%. Both the United States Dollar Index (DXY, -0.35%) and VIX (-0.26%) fell over the course of the week.

Market Recap

Our fund-flows week kicked off on Thursday, April 6, with equity market gains and short-term Treasury sell-offs. The Nasdaq (+0.76%), S&P 500 (+0.36%), Russell 2000 (+0.13%), and DJIA (+0.01%) all recorded gains, as the two- (+0.66%) and three- (+0.36%) year Treasury yields rose. Equity markets recouped on early morning losses due to a poor layoff report out of Challenger, Gray & Christmas. The Challenger Report showed employers cut 89,703 jobs in March—a 15% increase from last month and a 319% increase from March 2022. Layoffs in the first quarter were 270,416—396% higher than the first quarter of 2022 and the largest total since the beginning of the COVID-19 pandemic.

U.S. markets were closed Friday, April 7, in recognition of Good Friday.

On Monday, April 10, markets traded mixed with Friday’s U.S. nonfarm payrolls report showing labor market conditions remained tight in March—the Russell 2000 (+1.02%) was the big winner on the day. Nonfarm payrolls rose 236,000 last month, down from 326,000 in February. The labor force participation rate moved up (from 62.5% to 62.6%), while the unemployment rate fell (from 3.6% to 3.5%). The report also showed that growth in average hourly earnings year over year fell from last month—March (+4.2%) compared to February (+4.6%). The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, forecasted that global growth will be around 3% over the next five years. This projection is the lowest medium-term forecast since 1990 and significantly lower than the 3.8% average over the last 20 years. The March Survey of Consumer Expectations published by the New York Federal Reserve showed that the median inflation expectation for next year increased to 4.7%—marking the first increase since October.

On Tuesday, April 11, the National Federation of Independent Business (NFIB) published its Small Business Economic Trends report showing optimism increased in February (index = 90.9) but remains below the 49-year average of 98. The Russell 2000 gained 1.02% on the day, while the 10-year Treasury yield rose 3.70%.

Our fund-flows week wrapped up Wednesday, April 12, with the release of the Department of Labor’s latest release of the Consumer Price Index (CPI). The report showed that although headline CPI increased less than expected, core CPI increased 5.6% year over year. Shelter costs were the largest component of the rise in CPI, jumping 0.6% in March and 8.2% from last year. Minutes released from the Federal Reserve meeting in March showed that Fed officials were contemplating pausing rates before ultimately sticking with a 25-basis point (bps) rate hike. Minutes also showed that officials are worried that the banking issues following the collapse of Silicon Valley Bank and Signature Bank have increased the chances of a recession later this year. Equity markets fell on the day—Nasdaq (-0.85%), Russell 2000 (-0.72%), S&P 500 (-0.41%), and DJIA (-0.11%). Meanwhile, the 30-year Treasury yield rose 0.30%.

Exchange-Traded Equity Funds

Exchange-traded equity funds recorded $5.3 billion in weekly net inflows, marking the first weekly intake over the past three weeks. The macro-group posted a gain of 0.41% on the week, its fourth straight week of gains.

Growth/value-large cap ETFs (+$2.4 billion), sector-technology ETFs (+$735 million), and sector-financial/banking ETFs (+$685 million) were the top subgroups to log inflows. This was the second largest weekly inflow of the year for growth/value-large cap ETFs as they posted positive weekly performance in four straight weeks. Sector-technology funds have hit their largest four-week flow moving average since last November despite negative weekly returns (-0.73%).

Sector-healthcare/biotech ETFs (-$583 million), sector-energy (-$158 million), and sector-real estate (-$67 million) were the largest outflows under the macro-group. Three straight weeks of positive returns could not stop the bleeding from sector-healthcare/biotech ETFs—the subgroup has suffered 10 consecutive weeks of outflows. Sector-real estate funds have witnessed outflows in four of the last five weeks.

Over the past fund-flows week, the top two equity ETF flow attractors were SPDR S&P 500 ETF (SPY, +$1.3 billion) and Select Sector: Communication Services SPDR (XLC, +$943 million).

Meanwhile, the bottom two equity ETFs in terms of weekly outflows were Select Sector: Technology SPDR (XLK, -$550 million). and Select Sector: Industrials SPDR (XLI, -$274 million)

Exchange-Traded Fixed Income Funds

Exchange-traded fixed income funds observed a $3.3 billion weekly inflow—the macro-group’s eighth straight weekly inflow. Fixed income ETFs reported a weekly return of negative 0.20% on average, their second weekly loss in three.

Government-Treasury ETFs (+$1.9 billion), corporate-investment grade ETFs (+$685 million), and corporate-high yield ETFs ($304 million) logged the top weekly inflows under taxable fixed income subgroups. Government-Treasury ETFs have attracted inflows in nine straight weeks, despite sub-zero performance in two of the past three weeks.

Balanced Funds ETFs (-$6 million) was the only subgroup to observe weekly outflows. Despite four straight weeks of positive performance, this subgroup has suffered five consecutive weeks of outflows, with its four-week moving average being negative in 12 of the last 13 weeks.

Municipal bond ETFs reported a $136 million outflow over the week, marking their second weekly outflow in the last three. The subgroup realized a positive 0.37% average, their sixth straight week of gains.

iShares: iBoxx $Investment Grade Bond ETF (LQD, +$702 million) and iShares: 20+ Treasury Bond ETF (TLT, +$523 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.

On the other hand, SPDR Bloomberg 1-3 Month T-Bill ETF (BIL, -$321 million) and iShares: Floating Rate Bond ETF (FLOT, -$302 million) suffered the largest weekly outflows under all taxable fixed income ETFs.

Conventional Equity Funds

Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$5.2 billion) for the sixty-second straight week. Conventional equity funds posted a weekly return of positive 0.64%, the fourth straight week of gains.

Growth/value-large cap (-$2.4 billion), international equity (-$1.0 billion), and equity income funds (-$466 million) were the largest subgroup outflows under conventional equity funds. Growth/value-large cap funds have witnessed 16 weeks in a row with outflows. This subgroup has logged 64 consecutive weeks with a negative four-week flow moving average.

Gold and natural resources (+$66 million) was the only subgroup to post a weekly inflow under equity mutual funds. Gold and natural resources was one of two subgroups to log an inflow last week as they reported their fourth straight weekly inflow.

Conventional Fixed Income Funds

Conventional taxable-fixed income funds realized a weekly outflow of $418 million—marking their eighth straight outflow. The macro-group logged a negative 0.11% on average—their first week of losses in six.

Flexible funds (-$412 million), balanced funds (-$360 million), and international & global debt funds (-$111 million) reported the largest weekly outflows under taxable fixed income conventional funds. Flexible funds have now observed seven straight weeks of outflows, helping attribute to March’s monthly net outflow which was the largest of the year. This subgroup has realized five weeks of gains in the last six.

Conventional corporate-investment grade (+$443 million) and government-Treasury & mortgage (+$180 million) were the only taxable fixed income macro-group to produce inflows. Corporate-investment grade funds attracted their first weekly inflow in six weeks, even though two of the last three weeks have suffered negative performance.

Municipal bond conventional funds (ex-ETFs) returned a positive 0.39% over the fund-flows week—their sixth week of gains in seven. The subgroup experienced $220 million in outflows, marking the eighth straight week of outflows.

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