U.S. Weekly FundFlows Insight Report: Fund Investors And APs Take Different Paths For The Week


For the sixth week in a row, investors were overall net purchasers of fund assets (including those of conventional funds and ETFs), injecting $19.5 billion for Lipper’s fund-flows week ended July 17, 2019. Fund investors were net purchasers of money market funds (+$9.0 billion), taxable fixed income funds (+$5.2 billion), equity funds (+$3.7 billion), and municipal bond funds (+$1.7 billion).

Market Wrap-Up

For the fund-flows week ended July 17, 2019, despite more dovish comments from Federal Reserve Chair Jerome Powell, the broad-based U.S. indices were mixed as investors focused on Q2 earnings and a late fund-flows week tweet from President Donald Trump that an agreement with China on trade tariffs had “a long way to go.” After hitting three consecutive closing highs at the beginning of the fund-flows week, the Dow Jones Industrial Average Price Only Index managed to stay on the plus-side, returning 1.34% despite losing ground the last two days. However, the other broad-based U.S. indices were in the red, with the NASDAQ Composite Price Only Index (-0.21%) mitigating losses better than the other indices – the Russell 2000 Price Only Index (-0.91%) suffered the largest decline. Overseas, the Shanghai Composite Price Only Index managed to remain in the black, posting a weekly return of 0.57%, followed by the Nikkei 225 Price Only Index (+0.13%).

On Thursday, July 11, investors pushed the Dow and the S&P 500 to new all-time closing highs after Powell’s testimony to the Senate Banking Committee indicated why a preemptive rate cut might be necessary, even though the economy and job growth remain steady. Many pundits interpreted this to mean we could see a cut in rates later this month at the next policy-setting meeting. However, upside returns were capped after Trump tweeted that China is “letting us down” by not increasing purchases of U.S. agricultural products. On Friday, July 12, after Powell’s two-day testimony provided further support for investors’ expectations of an imminent interest rate cut, investors pushed the Dow above the 27,000-closing mark for the first time. A report indicating that eurozone factory output rose sharply in May outweighed news that Chinese exports fell as demand weakened.

On Monday, July 15, the Dow managed to post a slight gain – closing at another record high – but reports that China’s second-quarter GDP slowed to a 27-year low at 6.2% capped the equity rally. Stocks declined on Tuesday after Trump said there was a long way to go on a China trade deal during a briefing with reporters despite reports that June retail sales rose. On Wednesday, stocks continued to sag as the Beijing-Washington trade tiff remained on investors’ minds. However, investors kept a keen eye on the beginning reports of the Q2 earnings season. While a little premature, with just 9% of the S&P 500 constituents already reporting Q2 earnings, investors might have reason to be optimistic, with about 84% of those early reporters having beaten analyst expectations, according to Refinitiv’s Proprietary Research Team.

Exchange-Traded Equity Funds

For the second consecutive week, equity ETFs witnessed net inflows, taking in a little more than $8.8 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$8.5 billion), also for the second week in a row. Meanwhile, non-domestic equity ETFs witnessed net inflows for the second week in three, attracting $333 million this past week. The SPDR S&P 500 ETF (SPY, +$4.2 billion) and the iShares Core S&P 500 ETF (IVV, +$1.5 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, the Health Care Select Sector SPDR ETF (XLV, -$258 million) experienced the largest individual net redemptions and the Industrial Select Sector SPDR ETF (XLI, -$185 million) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the tenth week in a row, taxable fixed income ETFs witnessed net inflows, taking in $1.7 billion. APs were net purchasers of corporate investment-grade debt ETFs (+$966 million) and government-mortgage ETFs (+$480 million), while being net redeemers of government-Treasury ETFs (-$230 million) and international & global debt ETFs (-$5 million). The iShares MBS ETF (MBB, +$429 million) and the iShares Core U.S. Aggregate Bond ETF (AGG, +$246 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, the iShares 20+ Year Treasury Bond ETF (TLT, -$356 million) and the iShares JPMorgan USD Emerging Markets Bond ETF (EMB, -$236 million) handed back the largest individual net redemptions for the week. For the fifth consecutive week, municipal bond ETFs witnessed net inflows, taking in $237 million.

Conventional Equity Funds

For the twenty-second consecutive week, conventional fund (ex-ETF) investors were net redeemers of equity funds, withdrawing $5.1 billion. Domestic equity funds, handing back a little less than $3.8 billion, witnessed their twenty-fourth weekly net outflows while posting a 0.21% loss on average for the fund-flows week. Their non-domestic equity fund counterparts, posting a 0.06% gain on average, witnessed their fourth consecutive weekly net outflows (-$1.4 billion this past week). On the domestic equity side, fund investors gave a cold shoulder to large-cap funds (-$2.3 billion net) and small-cap funds (-$337 million), while investors on the non-domestic equity side were net sellers of international equity funds (-$905 billion) and global equity funds (-$448 million).

Conventional Fixed Income Funds

For the fifth consecutive week, taxable bond funds (ex-ETFs) witnessed net inflows, taking in some $3.4 billion this past week while posting a 0.01% loss for the fund-flows week. Investors were net redeemers of flexible funds (-$117 million) and government-Treasury funds (-$17 million), while corporate investment-grade debt funds (+$2.7 billion) and corporate high yield funds (+$421 billion) witnessed the largest net inflows of the group. For the twenty-eighth straight week, municipal bond funds (ex-ETFs) witnessed net inflows – taking in $1.4 billion – while posting a 0.07% gain on average (their fifth weekly market gain).

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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