Growth/Value Large Cap ETFs Suffer Second Largest Weekly Outflow On Record

During Refinitiv Lipper’s fund flows week ended April 20, 2022, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the third straight week, withdrawing a net $85.1 billion from the market.

Money market funds (-$62.0 billion), equity funds (-$14.7 billion), taxable bond funds (-$4.8 billion), and tax-exempt bonds (-$3.6 billion) all suffered weekly outflows.

Index Performance

At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices traded mixed – DJIA (+1.72%), Russell 2000 (+0.65%), S&P 500 (+0.29%), and Nasdaq (-1.40%). This was the third straight week reporting negative performance for the tech-heavy Nasdaq.

Fixed income indices struggle yet again, both the Bloomberg U.S. Aggregate Bond Index (-1.00%) and Bloomberg Municipal Bond Index (-0.92%) realized their seventh consecutive negative weekly performance.

Overseas broad market indices traded mixed – DAX 30 (+2.20%), FTSE 100 (+0.71%), Nikkei 225 (-0.17%), and Shanghai Composite (-1.89%).

Rates/Yields

The 10-two Treasury yield spread fell for the first week in three (-25.94%). Both the two-year (+10.12%) and five-year (+8.02%) Treasury yields outpaced their longer-dated counterparts – 10- (+5.47%) and 30-year (+2.86%).

As of April 20, the average contract rate for U.S. 30-year fixed-rate mortgages with conforming loan balances rose to 5.20% – the highest level since 2010. The United States Dollar Index (DXY, +0.51%) appreciated slightly while the VIX (-7.38%) decreased over the course of the week.

Market Recap

Our fund flows week kicked off Thursday, April 14, with the Census Bureau reporting a monthly increase in retail sales (+0.5%). The March figure is below forecasts and down from February’s 0.8% gain.

Online shopping declined (-6.4%) while gas station sales jumped (+8.9%). The Department of Labor stated there was a seasonally adjusted initial jobless claims of 185,000 for the week ending April 9 – prior year numbers were 571,000.

The University of Michigan also released its preliminary Consumer Sentiment Index which continues to decrease – April’s preliminary index was at 58.8 versus March’s 59.4. Treasury yields spiked more than 4% along all dated issues. U.S. board-based equity markets declined on the day – Nasdaq (-2.14%), S&P 500 (-1.21%), Russell 2000 (-0.99%), and DJIA (-0.33%).

On Friday, April 15, U.S. markets recognized Good Friday.

On Monday, April 18, Goldman Sachs said the move of the Federal Reserve to combat inflation through raising interest rates now puts the chances of a recession within the next 12 months at 15% and within the next two years at 35%.

The bank’s chief economist, Jan Hatzius, said that in 11 of the 14 Fed tightening cycles since World War II, a recession came within the following two years. According to a Federal Reserve Bank of New York survey, Americans expect mortgage rates to be around 5.9% this year, 6.7% next year, and 8.2% at some point within the next three years.

St. Louis Fed President James Bullard, who has been persistent in his hawkish rhetoric, said he would not rule out a 75 basis point (bps) hike. Equity markets traded slightly down for the second straight session – Russell 2000 (-0.74%), Nasdaq (-0.14%), DJIA (-0.11%), and S&P 500 (-0.02%). The 10-two Treasury yield spread increased 10.44% to close the day.

Tuesday, April 19, was a strong day for U.S. equity markets despite the International Monetary Fund (IMF) reporting that their projected global gross domestic product (GDP) has been downgraded in 2022 from 4.4% to 3.6% and from 3.8% to 3.6% in 2026.

The Nasdaq (+2.15%), Russell 2000 (+2.04%), S&P 500 (+1.61%), and DJIA (+1.45%) all appreciated on the day. Short-term Treasury yields also saw a sharp rise on the day – two- (+4.67%) and three-year (+3.99%) yields.

Our fund flows week wrapped up Wednesday, April 20, with headline news from two publicly traded companies, Netflix (NFLX) and Twitter (TWTR). Netflix, which lost more than a third of its value on the day, said that the suspension of its Russian service resulted in a loss of 700,000 subscribers (excluding that impact, the company would have reported a 500,000 net addition).

For Twitter, Elon Musk has been exploring ways to acquire the social media giant. Musk is looking at whether he can commence a tender offer to buy all outstanding common stock shares of the company. He also stated that Morgan Stanley has already offered funding.

The National Association of Realtors (NAR) reported that the median home price ($375,300) was up 15% since last year and hit its highest level since the group started reporting in 1999. NAR also published existing home sales in March fell 2.7% from February and that the 5.77 million annual sales rate was the lowest since June 2020.

The 10-year Treasury yield fell 2.71% as equity markets traded mixed – DJIA (+0.71%), Russell 2000 (+0.37%), S&P 500 (-0.06%), and Nasdaq (-1.22%).

Exchange-Traded Equity Funds

Exchange-traded equity funds recorded $9.7 billion in weekly net outflows, marking their second weekly outflow in a row. The macro group posted a positive return of 0.14% on the week, their first week of positive performance in three. An outflow of $9.7 billion is the fourth largest weekly outflow for equity ETFs in the last year.

Growth/value large cap ETFs (-$15.2 billion), growth/value small cap ETFs (-$445 million), and growth/value aggressive ETFs (-$131 million) were the top flow detractors under the macro group. Growth/value large cap ETFs posted their second largest outflow on record despite realizing a positive 0.11% on average over the week. This was only the second weekly outflow in the last 10 weeks.

Sector other ETFs (+$1.7 billion), equity income ETFs (+$1.5 billion), and sector healthcare/biotech ETFs (+$1.1 billion) were the largest equity ETF subgroups to post inflows this week.

Sector other ETFs have logged inflows in four of the last five weeks and their second straight week posting the top spot under equity ETFs. Equity Income ETFs realized a positive 1.62% on the week as they observed their fifth consecutive week of inflows.

Over the past fund flows week, the top three equity ETF flow attractors Select Sector: Health Care SPDR ETF (XLV, +$869 million), VanEck Semiconductor ETF (SMH, +$469 million), and iShares: Core High Dividend ETF (HDV, +$429 million).

Meanwhile, the bottom three equity ETFs in terms of weekly outflows were iShares: Core S&P 500 (IVV, -$10.3 billion), SPDR S&P 500 ETF (SPY, -$3.5 billion), and iShares: S&P 500 Growth ETF (IVW, -952 million).

Exchange-Traded Fixed Income Funds

Exchange-traded fixed income funds observed $1.7 billion in weekly net inflows – the macro group’s first week of inflows over the past three. Fixed income ETFs reported a weekly return of negative 0.51% on average – the macro – group’s seventh straight week of sub-zero performance.

Government Treasury ETFs (+$1.4 billion) and corporate investment grade ETFs (+$1.1 billion) were the only attractors of capital under fixed income ETFs. Government Treasury ETFs posted their eighth weekly inflow over the last nine weeks, despite suffering a negative weekly performance (-0.35%) for the sixth straight week. This subgroup has logged eight straight weeks with a four-week inflow moving average of more than $1.0 billion.

Flexible funds ETFs (-$500 million), government mortgage ETFs (-$194 million), and corporate high yield ETFs (-$57 million) witnessed the largest outflows under the fixed income ETF macro group. Flexible fund ETFs have logged three straight weeks of outflows paired with four weeks of negative weekly performance in the last five. Government mortgage ETFs have observed nine weekly outflows.

iShares: iBoxx $Investment Grade Corporates ETF (LQD, +$838 million) and SPDR Bloomberg 1-3 Month T-Bill ETF (BIL, +$617 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.

On the other hand, iShares: 7-10 Treasury Bond ETF (IEF, -$310 million) and ProShares: UltraPro Short QQQ ETF (SQQQ, -$209 million) suffered the largest net weekly outflows.

Conventional Equity Funds

Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$5.1 billion) for the eleventh straight week. Conventional equity funds posted a weekly return of a flat 0.00%. This is the eighth straight week the macro group has observed a four-week outflow moving average of more than $2.2 billion.

Growth/value large cap funds (-$1.9 billion), international equity (-$1.5 billion), growth/value-aggressive (-$722 million), and growth/value small -cap (-$573 million) were the largest subgroup outflows under conventional equity funds.

Growth/value large-cap funds have suffered nine weeks of outflows in the last 11 as they realized three straight weeks of negative performance. Growth/value small-cap funds have now recorded 11 straight weeks of outflows and have realized their largest four-week moving average flow of the year (-$1.3 billion).

Equity income conventional funds (+$203 million), sector other funds (+$123 million), and gold and natural resources funds (+$64 million) were the largest attractors of capital over this fund-flows week. After logging two straight weeks of positive performance, equity income funds report their first weekly inflow in three and the third-largest weekly intake of 2022.

Conventional Fixed Income Funds

Conventional fixed income funds realized a weekly outflow of $6.5 billion – marking their thirteenth straight week of outflows. The subgroup has produced a negative four-week flow moving average of at least $1.3 billion in 12 consecutive weeks. The macro group recorded a negative 0.36% on average – their third week in a row of sub-zero performance.

Corporate investment grade (-$4.7 billion), corporate high yield (-$828 million), and government mortgage (-$517 million) led the macro group in outflows. Conventional corporate investment grade funds have now suffered 10 consecutive weeks of outflows while government mortgage funds have seen negative flows for 13 straight.

The only subgroup to report a weekly inflow was government Treasury conventional funds (+$34 million). This past fund flows week was the first week of positive performance in the last four for the subgroup. Government Treasury funds now have six weeks of positive flows in seven.

Municipal bond funds (ex-ETFs) returned a negative 0.97% over the fund flows week – their seventh negative weekly performance in a row. The subgroup experienced $3.3 billion in outflows, marking their fifteenth week in a row of outflows and the third largest outflow of the year. The subgroup has logged 12 straight weeks with a four-week moving outflow average of greater than $1.1 billion. Conventional municipal bond funds only recorded five total weeks of net outflows in all of 2021.

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