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During Refinitiv Lipper’s fund flows week ended August 24, 2022, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the second straight week, adding a net $3.8 billion.
Money market funds (+$13.1 billion) were the only macro group to attract funds, while taxable bond funds (-$6.9 billion), equity funds (+$1.2 billion), and tax-exempt funds (-$1.1 billion) posted outflows.
Index Performance
At the close of Refinitiv Lipper’s fund flows week, U.S. broad-based equity indices traded negative for the first week in six – S&P 500 (-3.12%), Nasdaq (-3.92%), Russell 2000 (-2.62%), and DJIA (-2.98%).
Both the Bloomberg Municipal Bond Total Return Index (-0.95%) and Bloomberg U.S. Aggregate Bond Total Return Index (-1.29%) ended the week in the red for the third consecutive week.
Overseas broad market indices traded negative for the second straight week – FTSE 100 (-2.43%), Nikkei 225 (-4.03%), Shanghai Composite (-3.63%), and Dax 30 (-4.61%).
Rates/Yields
The 10-two Treasury yield spread remained negative (-0.28), marking the thirty-seventh straight trading session with an inverted yield curve. As of Thursday, August 24, investors will receive greater compensation for investing in the two-year Treasury note (3.39%) than the 10-year (3.11%).
According to Freddie Mac, the 30-year fixed-rate average (FRM) increased for the second week in three, from 5.13% to 5.55%. Both the United States Dollar Index (DXY, +1.92%) and the VIX (+12.71%) increased over the course of the week.
Market Recap
Our fund flows week kicked off Thursday, August 18, with the National Association of Realtors (NAR) reporting that existing home sales dropped 5.9% to a 12-month rate of 4.81 million.
July marked the sixth straight month of declines while hitting the lowest homes sold since June 2020. The report also showed median selling price fell to $403,000 but was still 10.8% higher than last year.
The Department of Labor (DoL) reported for the week ending August 20, seasonally adjusted unemployment claims came in at 243,000, a decrease of 2,000 from the previous week. Broad-based U.S. equity indices reported gains – Russell (+0.68%), S&P 500 (+0.23%), Nasdaq (+0.21%), and DJIA (+0.06%).
U.S. equity indices ended the calendar week on August 19 in the red, with the Russell 2000 (-2.17%) and the Nasdaq (-2.55%) as the daily losers. The U.S. Department of Commerce published its Quarterly Retail E-Commerce Sales report which showed e-commerce sales increased 2.7% from the first quarter of 2022 while total retail sales increased 1.9% quarter over quarter. Headline economic news on the day came from Federal Reserve Bank of Richmond President Thomas Barkin who said,
“There’s a path to getting inflation under control but a recession could happen in the process.”
He went on to say,
“Getting inflation under control is going to be necessary to set up what we have the potential to do in the economy…I’ve convinced myself that not getting inflation under control is inconsistent with a thriving economy.”
The 10-year Treasury yield rose 3.78% while the 10-two Treasury spread fell by its largest daily percentage amount in 30 sessions.
On Monday, August 22, equity markets fell for the second straight day with the Nasdaq (-2.55%) depreciating by its largest daily amount since the end of June.
The 10-two Treasury spread became more inverted for the first time in four days. The Chicago Fed National Activity Index (CFNAI) was published on Monday and showed above-average growth in July (+0.27 and up from June’s -0.25). The VIX increased 15.83% on the day.
On Tuesday, August 23, IHS Markit released its monthly US Composite Purchasing Managers’ Index (PMI). The report showed 27-month lows for both the US PMI Composite Output Index (45.0) and US Services Business Activity Index (44.1) while the US Manufacturing Output Index (49.3) came in at a 26-month low.
The Federal Reserve released their monthly Money Supply publication which detailed M1 supply fell, hitting its lowest level of the year. The U.S. Census Bureau and U.S. Department of Housing and Urban Development announced that the annual rate of sales of new single-family houses in July was 12.6% lower than June’s revised total and 29.6% below July 2021’s annual rate. U.S. equity markets traded mixed as the 10-two Treasury spread moved toward positive territory for the fourth time in five days.
Our fund flows week wrapped up Wednesday, August 24, with all eyes looking forward to Thursday’s Federal Reserve Jackson Hole symposium. The big news from Washington D.C. was President Joe Biden’s plan to forgive up to $10,000 in federal student loans.
The President also extended the COVID-19 emergency pause on payments, interest, and collections until the end of the year. Individuals with annual incomes of less than $125,000 and families with incomes under $250,000 will be eligible for the forgiveness.
An additional $10,000 in relief will be made available for Pell Grant recipients. Broad-based equity markets traded positive for the first day in four ahead of the Fed’s annual meeting in Jackson Hole – Russell 2000 (+0.84), Nasdaq (+0.41%), S&P 500 (+0.29%), and DJIA (+0.18%).
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $3.2 billion in weekly net inflows, marking their third straight weekly inflows. The macro group posted a negative return of 2.70% on the week, their first week of sub-zero returns in six.
Growth/value-large cap ETFs (+$2.2 billion), sector-financial/banking ETFs (+$1.9), equity income funds ETFs (+$1.1 billion), and sector-utilities ETFs (+$621 million) were the largest equity ETF subgroups to post inflows this week.
Growth/value-large cap ETFs recorded their third consecutive weekly inflow, despite realizing their largest weekly decline (-3.27%) since June 15. Equity income funds ETFs have produced nine consecutive weeks of net inflows and are on pace to post their twenty-fifth straight month of inflows.
Sector-technology (-$1.6 billion), sector-other ETFs (-$1.4 billion), international equity ETFs (-$387 million), and sector-real estate ETFs (-$81 million) were the only flow detractors under the macro group. Sector-technology ETFs posted their largest weekly outflow since May 2021 as they suffered losses of 4.30% over the week.
Over the past fund-flows week, the top three equity ETF flow attractors were SPDR S&P 500 (SPY, +$2.3 billion), Select Sector: Financials Sector SPDR (XLF, +$1.9 billion), and Select Sector: Utilities SPDR (XLU, +$592 million).
Meanwhile, the bottom three equity ETFs in terms of weekly outflows were Invesco S&P 500 Low Volatility (SPLV, -$1.1 billion), Select Sector: Technology SPDR (XLK, -$661 million), and Select Sector: Industrials SPDR (XLI, -$604 million).
Exchange-Traded Fixed Income Funds
Exchange-traded fixed income funds observed a net $4.5 billion weekly outflow – the macro group’s first outflows in nine weeks. Fixed income ETFs reported a weekly return of negative 0.78% on average, its third week straight realizing a negative return.
International & Global Debt ETFs (+$101 million) and government mortgage ETFs (+$15 million) were the only subgroups to report inflows under taxable fixed income ETFs. International & Global Debt ETFs have recorded eight straight weeks of inflows and are on pace for their largest monthly intake since July 2021. The subgroup suffered a negative 1.29% over the fund-flows week.
Corporate high yield ETFs (-$3.0 billion), corporate investment grade ETFs (-$733 million), and government Treasury ETFs (-$570 million) were the largest weekly outflows under taxable fixed income ETFs.
Corporate high yield ETFs suffered their eighth largest weekly outflow to date as they ended their prior four-week inflow stretch. Corporate investment grade ETFs observed their first week of outflows in eight.
Municipal bond ETFs reported a $472 million outflow over the week, marking their third weekly outflow in as many weeks. The subgroup realized a negative 0.74% on average, their third straight week in the red.
iShares: 7-10 Treasury Bond ETF (IEF, +$324 million) and iShares: Core US Aggregate Bond ETF (AGG, +$283 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: iBoxx High Yield Corporates (HYG, -$1.3 billion) and SPDR BBG High Yield Bond ETF (JNK, -$981 million) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$4.4 billion) for the twenty-ninth straight week. Conventional equity funds posted a weekly return of negative 2.83%, their first week of negative performance in six.
Growth/value-large cap funds (-$2.3 billion), international equity (-$598 million), growth/value-aggressive ETFs (-$483 million), and global equity funds (-$401 million) were the largest subgroup outflows under conventional equity funds.
Growth/value-large cap funds observed their nineteenth weekly outflow in a row moving their four-week moving outflow figure to reach its highest point since December.
International equity conventional funds have also suffered 19 straight weeks of outflows along with two straight weeks of sub-zero performance. Their four-week flow moving average has remained negative for 19 consecutive weeks.
Sector-other funds (+$64 million), sector-energy (+$44 million), and sector-utilities (+$4 million) were the only subgroup attractors of new capital under conventional equity funds. Sector-other funds have recorded seven straight weeks of plus-side returns as they have attracted new money in four of the last five weeks.
Conventional Fixed Income Funds
Conventional taxable-fixed income funds realized a weekly outflow of $2.3 million – marking their twenty-ninth weekly outflow in 31. The subgroup has produced a negative four-week flow moving average in 30 consecutive weeks. The macro-group recorded a negative 1.19% on average – their second straight week of negative returns.
Corporate high yield funds (-$1.6 billion), balanced funds (-$332 million), and international & global debt funds (-$249 million) led the macro group in outflows. Corporate high yield funds logged their second straight week of sub-zero performance as they realized their largest weekly outflow since mid-June.
Flexible funds (+$199 million) were the only taxable fixed income conventional fund subgroups to attract weekly inflows. Conventional flexible funds have produced seven consecutive weeks of inflows despite suffering their first week of negative performance (-1.20%) in six.
Municipal bond conventional funds (ex-ETFs) returned a negative 0.86% over the fund flows week – their third consecutive week of negative returns. The subgroup experienced $708 million in outflows. Conventional municipal bond funds have only experienced four weeks of inflows year to date.
Original Post
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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