During LSEG Lipper’s fund-flows week that ended June 21, 2023, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the first week in three, withdrawing a net of $29.7 billion.
Taxable-bond funds (+$2.8 billion) and tax-exempt bond funds (+$672 million) attracted new capital. Equity funds (-$17.0 billion) and money market funds (-$16.1 billion) suffered outflows on the week.
Index Performance
At the close of LSEG Lipper’s fund-flows week, U.S. broad-based equity indices reported negative returns—the Russell 2000 (-0.59%), Nasdaq (-0.91%), S&P 500 (-0.16%), and DJIA (-0.08%) were all in the red. For the DJIA, Nasdaq, and S&P 500, this was the first negative return over the last four weeks.
The Bloomberg Municipal Bond Total Return Index (+0.33%) recorded its fourth straight weekly gain. The Bloomberg U.S. Aggregate Bond Total Return Index (+0.64%) logged its third week in the black in four.
Overseas indices traded down—Nikkei 225 (-1.61%), Shanghai Composite (-1.45%), FTSE 100 (-0.29%), and DAX (-0.85%).
Rates/Yields
The 10-two Treasury yield spread remained negative (-0.99), marking the two-hundred-and-fifty-second straight trading session with an inverted yield curve. The 10-year Treasury yield fell 2.28% on the week.
According to Freddie Mac (OTC:FMCC), the 30-year fixed-rate average (FRM) decreased for the third straight week—currently at 6.67%. Both the United States Dollar Index (DXY, -0.85%) and VIX (-5.15%) fell over the course of the week.
Market Recap
Our fund-flows week kicked off on Thursday, June 15, with the weekly initial jobless claims data showing seasonally adjusted initial claims was 264,000. The four-week moving average was 255,750—an increase of 8,500 from the previous week’s revised average and the highest four-week average level since November 13, 2021. The U.S. Census Bureau also announced the Advance Monthly Sales for Retail and Food Services report highlighting estimates of U.S. retail and food services sales were up 0.3% from the previous month and up 1.6% from 12-months ago—many forecasts had a monthly decline (-0.1%). Equity markets fared well on the day, both the S&P 500 (+1.22%) and Nasdaq (+1.15%) logged their sixth straight daily gain following Federal Reserve Chair Jerome Powell’s announcement that the Fed will not increase interest rates this earlier week.
Friday, June 16, the University of Michigan published their consumer sentiment report detailing an increase in the U.S. to 63.9, marking the highest level in four months. These figures also beat forecasts, reflecting there may be greater market optimism than originally thought with the debt ceiling drama passed (for now) and inflation trending downward (for now). Treasury yields rose on the day, led by the five-year yield (+1.89%). Equity markets fell on the day—Russell 2000 (-0.73%), Nasdaq (-0.68%), S&P 500 (-0.37%), and DJIA (-0.32%).
On Monday, June 19, markets were closed in the U.S. in recognition of Juneteenth.
On Tuesday, June 20, President Joe Biden stated that U.S. and China ties are on the “right trail,” saying that progress was made during Secretary of State Antony Blinken’s two-day Beijing trip. The President of the People’s Republic of China Xi Jinping seconded Biden’s comments and said, “China respects U.S. interests and does not seek to challenge or displace the U.S.” He added that the, “U.S. needs to respect China and must not hurt China’s legitimate rights and interests.” The U.S. Census Bureau published its Monthly New Residential Construction that showed privately owned housing starts in May were 21.7 percent above the revised April number. Privately owned housing completions in May were also up (+9.5%) above April’s revised estimate. Both equity markets and Treasury yields fell on the day—DJIA (-0.72%) and S&P 500 (-0.47%), while the 10-year Treasury yield fell (-0.98%).
Our fund-flows week wrapped up Wednesday, June 21. Equity markets fell for the third straight day—Nasdaq (-1.21%), S&P 500 (-0.52%), DJIA (-0.30%), and Russell 2000 (-0.20%). Fed Chair Powell came out and insinuated that the central bank’s rate hikes are not done this year, saying, “Earlier in the process speed was very important. It’s not very important now…Given how far we’ve come, it may make sense to move rates higher but to do so at a more moderate pace.” The two-year Treasury yield increased by 0.38% on the day, while the three-, five-, 10-, and 30-year yields all fell.
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $12.1 billion in weekly net outflows, marking the second weekly outflow in three and third largest this year. The macro-group posted a 0.34% loss on the week, its first week in the red over the last four.
Growth/value-large cap ETFs (-$6.2 billion), growth/value-small cap ETFs (-$2.4 billion), and sector-other (-$1.5 billion) were the largest outflows among equity ETF subgroups. Growth/value-large cap ETFs reported their largest weekly outflow in 12 weeks while realizing their first weekly loss in four.
Sector-financial/banking ETFs (+$949 million), growth/value-aggressive ETFs (+$366 million), and sector-real estate ETFs (-$79 million) were the largest inflows under the macro-group. Despite logging back-to-back weeks of negative performance, sector-financial/banking ETFs posted three straight weeks of inflows. This was also the subgroup’s second largest weekly intake on the year.
Over the past fund-flows week, the top two equity ETF flow attractors were iShares: Core S&P 500 (IVV, +$2.7 billion) and Invesco S&P 500 Equal Weight (RSP, +$1.2 billion).
Meanwhile, the bottom two equity ETFs in terms of weekly outflows were SPDR S&P 500 ETF (NYSE:SPY) (SPY, -$6.0 billion) and iShares: Russell 2000 ETF (IWM, -$2.6 billion).
Exchange-Traded Fixed Income Funds
Exchange-traded taxable fixed income funds observed a $3.1 billion weekly inflow—the macro-group’s sixth weekly inflow in seven. Fixed income ETFs reported a weekly return of negative 0.35% on average, their third week in the black in four.
Corporate-investment grade ETFs (+$1.8 billion), government-Treasury ETFs (+$771 million), and flexible funds ETFs (+$325 million) were the top taxable fixed income subgroups to post inflows over the week. Corporate-investment grade ETFs have logged six weeks of inflows over the last seven while realizing back-to-back weeks of plus-side returns.
International & global debt ETFs (-$45 million), corporate-high yield ETF (-$13 million), and balanced funds ETFs (-$7 million) were the top taxable fixed income subgroups to witness outflows on the week. International & global debt witnessed their first weekly outflow over the last four, despite four straight weeks of gains.
Municipal bond ETFs reported a $514 million inflow over the week, marking their first outflow in the three weeks. The subgroup realized a positive 0.27% gain, marking fourth straight week in the black.
iShares: iBoxx $Investment Grade Corporates (LQD, +$1.5 billion) and Wisdom Tree: Floating Rate Treasury ETF (USFR, +$436 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares: $High Yield Corporates ETF (HYG, -$626 million) and Schwab US TIPS ETF (SCHP, -$366 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 seventy-second straight week. Conventional equity funds posted a weekly return of negative 0.27%, the first week of losses in four.
Growth/value-large cap (-$2.0 billion), international equity funds (-$634 million), and equity income funds (-$624 million) were the largest subgroup outflows under conventional equity funds. Growth/value-large cap funds have suffered 26 consecutive weeks of outflows while observing a 0.18% loss on average. The four-week net flow moving average has remained negative for 74 weeks.
Sector-technology conventional funds (+$18 million) was the only subgroup to report weekly inflows. This was the third week of inflows over the past for this subgroup.
Conventional Fixed Income Funds
Conventional taxable-fixed income funds realized a weekly outflow of $313 million—marking their first weekly outflow over the past three weeks. The macro-group logged a positive 0.28% on average—their fourth straight week of gains.
Conventional corporate-investment grade funds (+$415 million), corporate-high yield funds (+$278 million), and government-mortgage funds (+$23 million) reported the largest weekly outflows under taxable fixed income conventional funds. This was the third straight weekly inflow for conventional corporate-investment grade funds.
Conventional flexible funds (-$661 million), international & global debt funds (-$144 million), and balanced funds (-$96 million) were the top taxable fixed income macro-group to produce outflows. Flexible funds have suffered 15 weeks of outflows in the last 16, despite four consecutive weeks of gains.
Municipal bond conventional funds (ex-ETFs) returned a positive 0.28% over the fund-flows week—their seventh weekly gain in nine. The subgroup experienced $158 million in inflow, marking the second inflow in the past three weeks.