Investors were overall net redeemers of fund assets (including those of conventional funds and ETFs) for the fourth week in a row, withdrawing a net $6.8 billion for the Refinitiv Lipper fund-flows week ended Wednesday, October 19. Fund investors were net purchasers of equity funds (+$4.1 billion) while being redeemers of money market funds (-$5.7 billion), taxable bond funds (-$2.6 billion), and tax-exempt fixed income funds (-$2.6 billion) for the week.
Market Wrap-Up
The U.S. equity and bond markets took a wild rollercoaster ride during the fund-flows week, experiencing crazy gyrations as investors weighed the September consumer price index (CPI) coming in higher than analyst expectations against a better-than-expected start of the third-quarter corporate earnings season.
On the domestic side of the equation, the Dow Jones Industrial Average (+4.15%) outpaced the other broadly followed indices for the fund-flows week. It was followed by the S&P 500 Index (+3.30%). The Russell 2000 (+2.25%) was the straggler of the group. Overseas, Xetra DAX Total Return Index (+5.65%) posted the strongest plus-side returns of the other often-followed broad-based international indices, while the Shanghai Composite (-0.20%) and the Nikkei 225 (+1.28%) were the group relative laggards.
For the fund-flows week, the Morningstar LSTA U.S. Leveraged Loan Index (+0.19%) outpaced the Bloomberg Municipal Bond Index (-0.27%) and the Bloomberg U.S. Aggregate Bond Index (-1.40%).
On Thursday, October 13, the DJIA posted its best one-day percentage gain since November 9, 2020, rising 2.83%, even after investors learned that core CPI—which strips out volatile food and energy prices—rose 0.6% in September, coming in higher than analysts’ expectations of a 0.4% rise. Investors’ initial reaction was to push the Dow down by 500 points early in trading, but it rebounded strongly as investors appeared to focus on the beginning of Q3 earnings season and the release of the weekly jobless claims. The Department of Labor reported that the number of first-time jobless claims rose by 9,000 to 228,000 for the week prior—its highest level since late August. The 10-year Treasury yield rose six basis points (bps), closing the day out at 3.97%, while the two-year Treasury yield rose 19 bps to 4.47%.
U.S. stocks closed significantly lower on Friday, October 14, as inflation concerns weighed on investors after the University of Michigan’s consumer sentiment survey showed expectations for inflation over the next year rose to 5.1%. The Nasdaq Composite declined 3.08% on the day, finishing at its lowest closing value since July 2, 2020. The 10-year Treasury yield rose three bps to close at 4.00%.
Reversing the decline on Friday, the Nasdaq posted its largest one-day percentage gain (+3.43%) since July 27 on Monday, October 17, as investors cheered a better-than-expected Q3 earnings and revenue report from Bank of America (NYSE:BAC) (BAC) and after Jeremy Hunt—the U.K’s new finance minister—threw out almost all of the previously announced unfunded tax cuts that were blamed for igniting the recent global market volatility and concerns with the global financial system.
Stocks continued their ascent on Tuesday, October 18, as investors applauded another round of strong corporate earnings reports, with Goldman Sachs (NYSE:GS) beating its Q3 earnings and revenue targets. According to Refinitiv’s Proprietary Research Team, of the 45 companies in the S&P 500 that have reported earnings thus far, 68.9% have beaten analysts’ expectations. However, market gains were capped on rising geopolitical concerns after Secretary of State Antony Blinken accused China of accelerating plans to seize Taiwan. In other news, U.S. industrial output rose 0.4% in September.
Despite strong quarterly earnings reports from Netflix (NASDAQ:NFLX) and Procter & Gamble (NYSE:PG), U.S. stocks snapped their two-day winning streak on Wednesday, October 19, after the 10-year Treasury yield jumped to its highest level since July 23, 2008, rising 13 bps to 4.14%, after the Federal Reserve’s Beige Book showed the U.S. economy expanded modestly over the past six weeks but price growth remained elevated.
Exchange-Traded Equity Funds
Equity ETFs witnessed their third straight week of net inflows, taking in $11.3 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$9.9 billion), injecting money also for the third week in a row, while nondomestic equity ETFs witnessed their fourth straight week of net inflows, attracting $1.4 billion this past week. Large-cap ETFs (+$6.6 billion) observed the largest net inflows of the equity ETF macro-groups for the fund-flows week, followed by sector-technology ETFs (+$1.0 billion) and equity income ETFs (+$910 million). Meanwhile, the commodities heavy, sector-other ETFs (-$1.3 billion) suffered the largest net outflows, bettered by the sector-utilities ETFs (-$323 million).
SPDR S&P 500 ETF (SPY, +$5.5 billion) and SPDR S&P 400 Mid Cap Value ETF (MDYV, +$513 million) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Invesco QQQ Trust 1 (QQQ, -$1.1 billion) experienced the largest individual net redemptions and iShares Gold Trust (IAU, -$691 million) suffered the second largest net redemptions of the week.
Exchange-Traded Fixed Income Funds
For the third consecutive week, taxable fixed income ETFs witnessed net inflows, taking in $5.5 billion this week. APs were net purchasers of government-Treasury ETFs (+$3.9 billion), corporate investment-grade debt ETFs (+$1.4 billion), and international & global debt ETFs (+$254 million), while being net redeemers of flexible ETFs (-$104 million).
iShares U.S. Treasury Bond ETF (GOVT, +$2.2 billion), iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, +$1.1 billion), and WisdomTree Floating Rate Treasury ETF (USFR, +$817 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares iBoxx $ High Yield Corporate Bond ETF (HYG, -$626 million) and iShares 20+ Year Treasury Bond (TLT, -$357 million) handed back the largest individual net redemptions for the week.
For the first week in three, municipal bond ETFs suffered net redemptions, handing back $381 million this week. iShares National Muni Bond ETF (MUB, +$113 million) witnessed the largest draw of net new money of the municipal bond ETFs, while JP Morgan Ultra-Short Municipal Income ETF (JMST, -$332 million) experienced the largest net redemptions in the subgroup for the week.
Conventional Equity Funds
Conventional fund (ex-ETF) investors were net sellers of equity funds for the thirty-seventh week in a row—redeeming $7.2 billion—with the macro-group posting a market return of 2.33% for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly more than $3.6 billion, also witnessed their thirty-seventh consecutive week of net outflows while chalking up a 2.58% market gain on average for the fund-flows week. Nondomestic equity funds—posting a 1.72% weekly market gain on average—observed their twenty-eighth straight week of net outflows, handing back $3.5 billion this week.
On the domestic equity side, fund investors were net redeemers of large-cap funds (-$1.8 billion) and mid-cap funds (-$479 million). Investors on the nondomestic equity side were net redeemers of international equity funds (-$2.9 billion) and global equity funds (-$665 million) for the week.
Conventional Fixed Income Funds
For the ninth consecutive week, taxable bond funds (ex-ETFs) witnessed net outflows—handing back $8.1 billion this past week—while posting a 0.22% market loss on average for the fund-flows week. The corporate high yield funds macro-group (+$154 million) attracted the only net new money of the taxable bond funds group for the week. Corporate investment-grade debt funds (-$5.0 billion) suffered the largest net redemptions for the fund-flows week, bettered by flexible funds (-$1.5 billion) and international & global debt funds (-$442 million).
The municipal bond funds group posted a 0.53% loss on average during the fund-flows week (their second consecutive market decline) and witnessed net outflows for the ninth straight week, handing back $2.2 billion this week. General & Insured Municipal Debt Funds (-$609 million) and High Yield Municipal Debt Funds (-$450 million) suffered the largest net redemptions for the week.
Year to date, the municipal bond funds macro-group handed back $116.8 billion—witnessing the largest net redemption thus far of any full year dating back to 1992 when Lipper began calculating weekly estimated net flows.