U.S. Weekly FundFlows Insight Report: Despite Record Market Highs, Investors Turn Conservative For The Fund-Flows Week

Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the fifth week in a row. They injected $23.5 billion for Refinitiv Lipper’s fund-flows week ended December 9, 2020, as investors continued to cheer COVID-19 vaccine-related news and kept hopes up on seeming bipartisan support for a scaled-back relief bill. Fund investors, however, appeared to be a bit nervous, injecting a net $22.3 billion into money market funds, $5.4 billion into taxable bond funds, and $992 million into municipal bond funds. Meanwhile, investors were net redeemers of equity funds, withdrawing $5.4 billion this week.

Market Wrap-Up

Once again, the U.S. market hit multiple record closing highs during the fund-flows week even after reports of a record number of COVID-19 cases and hospitalizations. The broad-based indices hit record closing highs on three of the five trading days during the flows week as investors embraced news of the rollout of vaccines in the U.K., positive steps towards an FDA emergency approval in the U.S., and rising hopes that lawmakers will approve a narrowed COVID-19 stimulus package.

On the domestic side of the equation, stocks rallied with the Dow, S&P 500, Nasdaq, and the Russell 2000 setting record closes on Friday, December 4, a feat not seen since January 22, 2018. However, the Nasdaq Composite Price Only Index (-0.08%) witnessed the weakest returns for the fund-flows week of the broadly followed U.S. indices after taking a beating on Wednesday as investors embraced out-of-favor issues and took profits on many of the “stay-at-home” issues. The Russell 2000 Price Only Index (+3.49%) posted the strongest returns for the flows week. Overseas, despite Brexit concerns, the FTSE 100 Price Only Index (+2.09%) chalked up the strongest returns of the often-followed broad-based global indices, while the Shanghai Composite Price Only Index (-1.79%) witnessed the largest declines.

The U.S markets started the fund flows week on a whimper as investors pushed the S&P 500 down on vaccine distribution doubts. On Thursday, December 5, Pfizer announced that it expected to ship only half of the vaccines it had planned to deliver for 2020 as it stumbled over supply-chain issues. Despite hitting a one-day record number of COVID-19-related deaths in the U.S., the Dow and the Nasdaq were able to stay in the black as investors remained hopeful that a new round of stimulus would be agreed upon by U.S. lawmakers. As mentioned earlier, on Friday, December 4, all four commonly followed U.S. indices hit record closes on the day as investors anticipated lawmakers would be forced to approve a stimulus package after the U.S. Department of Labor reported that the U.S. economy added only 245,000 jobs in November, missing analyst expectations of 432,000, the smallest monthly gains since the U.S. began to emerge from the lockdown. On a positive note, in October U.S. factory goods orders rose for the sixth consecutive month.

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