U.S. Weekly FundFlows Insight Report: First Fund-Flows Week Of 2021 May Signal Continuing Rotation

Investors were overall net redeemers of fund assets (including those of conventional funds and ETFs) for the first week in three. They withdrew $8.5 billion for Refinitiv Lipper’s fund-flows week ended January 6, 2021, despite pushing the Dow to another set of record closes during the week. Fund investors withdrew $5.4 billion from equity funds and a net $10.1 billion from money market funds. Meanwhile, investors were net purchasers of taxable and tax-exempt fixed income funds, injecting slightly less than $6.0 billion and $1.1 billion, respectively, this week.

Market Wrap-Up

The Dow and S&P 500 finished up the year in record territory as investors cheered the approval and roll-out of COVID-19 vaccines. However, in the first few days of 2021, concerns about a potential large rise in government borrowing costs to support another round of fiscal stimulus, the record growth in coronavirus hospitalizations and deaths, and the slow rollout of vaccines put investors on edge and pushed the 10-year Treasury yield above 1.00% for the first time since March.

On the domestic side of the equation, as investors continued their rotation out of the “stay-at-home” and large tech issues, the Russell 2000 Price Only Index (+3.49%) posted the strongest returns for the fund-flows week of the broadly followed U.S. indices. In contrast, the NASDAQ Composite Price Only Index (-1.00%) witnessed the only losses after posting an eyepopping 43.64% return in 2020 (its best one-year return since 2009). Overseas, the Shanghai Composite Price Only Index (+5.11%) witnessed the strongest plus-side weekly performance of the often-followed broad-based global indices, while the Nikkei 225 Price Only Index (-1.55%) witnessed the largest decline.

Despite a record number of COVID-19 hospitalizations reported on the last day of the year, investors pushed the Dow and the S&P 500 to record closes as investors embraced news of the onset of global vaccinations and first-time jobless benefits unexpectedly declined in the week prior. The average equity fund rung out the tumultuous year posting a handsome 15.63% return for 2020. The markets were closed on Friday, January 1, in observation of New Year’s Day.

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