Image Source: Pixabay

Index Performance 

At the close of the LSEG Lipper fund flows ending October 29, 2025, U.S. broad-based indices were mixed across the board. The S&P 500 Total Return index increased 0.72%, while the Dow Jones gained 0.75%. The Nasdaq rallied 2.24%, driven by the infamous artificial intelligence boom. The Russell 2000 Index was the only lagger for the week and trailed its peers by 1.36%.

Broad-based fixed income indices performance softened this week, with all major indices finishing in negative territory. The FTSE High Yield Total Return Index declined by 0.02%, while the FTSE Municipal Tax-Exempt Investment Grade Bond Index fell 0.18%. The FTSE U.S. Broad Investment Grade Bond Total Return Index posted the steepest decline, down 0.54%.

Macro Viewpoint

Coming off the back of the highly anticipated Consumer Price Index (CPI-U) release, in which inflation rose 0.3% month over month in September, one basis point (bp) lower than August’s reading. All eyes were focused on the FOMC, as investors awaited confirmation of the Fed’s next move.

A rate cut was largely priced in following the reduction at the previous meeting. Historically, Chair Powell has maintained a measured approach to easing, emphasizing data dependency. However, the ongoing government shutdown has delayed key economic releases, forcing the Fed to operate in a data vacuum. Despite the lack of data, Chair Powell reiterated that the committee’s dual-mandated outlook remains unchanged from September and that the Fed remains committed to reducing inflation and maximizing employment.

The FOMC took a more hawkish stance, and lowered the policy rate by 25 bps, while also reducing its balance sheet. Powell noted, “While the official employment data for September are delayed, evidence suggest that both layoffs and hiring remain low and perceptions of job availability continue to decline.”

This comment suggests a potential softness in the labor market once the complete data is released, implying upward pressures on unemployment readings. The combination of tariff headwinds, high, but easing inflation and labor market uncertainty underscores the complexity of the Fed’s path ahead. Discussion at the meeting also turned to the December outlook, with Chair Powell cautioning that “a further reduction in the policy rate is not a foregone conclusion.”

Fund Flows by Asset Type

U.S. money market funds recovered this week, with an impressive $23.2 billion in net flows, a steep reversal from the $21 billion in outflows recorded the prior week. Investors are sheltering in cash, amid heightened uncertainty and the feeling of “walking blind,” as key economic data remains stalled due to the ongoing government shutdown.

U.S. equity funds attracted a strong $9.9 billion, up from $2.4 billion the previous week, marking a second consecutive week of positive flows. Despite lingering concerns around economic weakness and speculation of an AI bubble, flows continue to pour into large-cap funds. Which brings up the questions of whether investors are chasing favorable growth or are the markets exhibiting a herding behavior?

Within fixed income, U.S. taxable bonds funds extended their winning streak for a third consecutive week, adding $6.7 billion. In comparison, U.S. municipal bond funds posted a fourth week of gains with $1.1 billion in net inflows, reflecting strong demand for tax-exempt income. Momentum continued for commodity funds, posting a fourth straight week of inflows totaling $5.3 billion, driven by inflation hedges and the rally in precious metals. Meanwhile, U.S. mixed-assets funds snapped an eight-week outflow streak, recording a modest $31 million inflow. Could this be a sign of a rotation in investor sentiment? Finally, alternative funds experienced a marginal increase in inflows, bringing in a low of $5.8 million.

More By This Author: