U.S. Weekly FundFlows Insight Report: In Contrast With Fund Investors, APs Give Cold Shoulder To Bonds, Embrace Equities

Investors were overall net sellers of fund assets (including those of conventional funds and ETFs) for the first week in three. They withdrew a net $2.7 billion for Refinitiv Lipper’s fund-flows week ended May 5, 2021, with all of the net redemptions attributable to short-term assets. Fund investors were net redeemers of money market funds (-$14.6 billion) while being net purchasers of taxable bond funds (+$6.5 billion), equity funds (+$4.8 billion), and tax-exempt fixed-income funds (+$585 million) for the week.

Market Wrap-Up

For the fund-flows week, returns for the broad-based U.S. indices were generally down as investors weighed the dichotomy of reports of strong Q1 corporate earnings and economic resurgence against worries about inflation and stretched valuations for equities. While Federal Reserve officials have doubled down on their conviction that interest rates will remain unchanged for the foreseeable future, comments late in the fund-flows week by Treasury Secretary Janet Yellen and Dallas Fed President Robert Kaplan on inflation and the need to review the Fed’s asset purchases raised general concern with some market participants. Nonetheless, the DJIA booked its twenty-second record close of 2021 during the week.

On the domestic side of the equation, the Dow Jones Industrial Average Price Only Index (+1.21%) witnessed the only plus-side returns of the other broadly followed U.S. indices for the fund-flows week, followed by the S&P 500 Price Only Index (-0.37%). The NASDAQ Composite Price Only Index (-3.34%) suffered the largest declines for the week after tech shares came under pressure, even after Apple and Facebook reported stellar Q1 earnings reports at the beginning of the week. Overseas, the FTSE 100 Price Only Index (+1.12%) posted the strongest returns of the other often-followed broad-based global indices, while the Xetra DAX Total Return Index (-1.48%) witnessed the largest declines.

On Thursday, April 29, 2021, the S&P 500 closed at record highs as upbeat earnings reports from tech stalwarts and economic data helped confirm the surge in Q1 GDP growth. The Bureau of Economic Analysis reported that U.S. real gross domestic product increased at an annual rate of 6.4% in Q1 2021. The equity market was further supported by news that the first-time jobless claims from the week prior fell to 553,000. Stocks got an additional boost from a strong beginning in Q1 corporate earnings reports after Apple and Facebook handily beat analyst expectations. U.S. stocks closed lower on Friday, April 30, despite a spate of better-than-expected Q1 earnings reports as investors learned that Dallas Fed President Kaplan said he believes it is time to discuss tapering the central bank’s asset purchases. This accompanied by news that personal income jumped 21.1% in March raised some concerns that the Fed may need to ease back on its loose monetary policy sooner than it expects.

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