Investors were overall net redeemers of fund assets (including those of conventional funds and ETFs) for the first week in three, withdrawing a net $20.2 billion for the Refinitiv Lipper’s fund-flows week ended Mar. 9, 2022. Fund investors were net purchasers of equity funds (+$12.5 billion) while being net redeemers of money market funds (-$26.2 billion), taxable bond funds (-$5.8 billion), and tax-exempt fixed income funds (-$662 million) for the week.
Market Wrap-Up
Markets were roiled during the fund-flows week as investors considered the impacts that skyrocketing commodity prices, the Russia-Ukraine conflict, and Federal Reserve policies might have on the global economy and markets. The Dow Jones Industrial Average entered market correction territory, declining 11% from its Jan. 4 record high, while the NASDAQ Composite entered bear market territory, declining more than 20% from its November 2021 highs during the fund-flows week.
After a strong one-day market turnaround on Wednesday, Mar. 9, on the domestic side of the equation, the Dow Jones Industrial Average Price Only Index (-1.79% for the week and down 8.40% YTD) mitigated losses better than the other broadly followed U.S. indices for the fund-flows week as investors looked for some semblance of safety in this volatile time. It was followed by the Russell 2000 Price Only Index (-2.07% and -10.20%, respectively). The NASDAQ Composite Price Only Index (-3.61% and -15.27%, respectively) posted the largest weekly decline of the other U.S. indices for the week. Overseas, the Xetra DAX Total Return Index (-1.29% and -15.32%, respectively) mitigated losses better than the other often-followed broad-based international indices, while the Shanghai Composite Price Only Index (-6.62% and -9.72%, respectively) was the group laggard.
On Thursday, Mar. 3, 2022, all three U.S. indices finished the day lower as the Russian incursion of Ukraine entered its second week. Investors were keeping a keen eye on how international sanctions on Russia might impact domestic policy. Speaking before the Senate Banking Committee, Fed Chair Jerome Powell indicated he would still recommend a 25-basis-point (bps) increase in the Fed’s benchmark interest rate. Powell left the door open, however, for more aggressive hikes if inflation doesn’t subside. First-time jobless claims fell by 18,000 to 215,000 in the last week of February, while the Institute for Supply Management said its February service-sector gauge fell to a one-year low of 56.5% versus analyst expectations of 61%. Front-month crude oil prices witnessed a slight decline, closing the day out at $110.46 per barrel (bbl.) and the 10-year Treasury yield remained unchanged, closing at 1.86%.
The DJIA dropped for the fourth straight week on Friday, Mar. 4, as investors focused on a worsening conflict between Russia and Ukraine. Commodity prices soared as sanctions on Russia were likely to cause supply disruptions in oil, natural gas, and grains. The Russian invasion overshadowed a strong February nonfarm payrolls report. The U.S. Bureau of Labor Statistics reported the U.S. economy added 678,000 new jobs in February, beating analysts’ expectations of 444,000. The unemployment rate edged down to 3.8%. Oil prices remained on the rise with West Texas Intermediate Crude rising 7.4%, closing at 115.68/bbl. The 10-year Treasury yield fell 12 bps to 1.74% as investors moved toward safe-haven assets.
The DJIA witnessed a near 800-point decline on Monday, Mar. 7, ending in correction territory as the Russia-Ukraine conflict escalated and oil rose to multi-year highs as the White House was still pondering a decision to ban energy imports out of Russia. Hostilities continued as cease-fire discussions failed and an estimated 1.7 million refugees fled into neighboring countries. The prices of grain and oil continued their ascents as the conflict shut down exports from the Black Sea region. Front-month crude oil futures rose to their highest levels in more than 13 years to settle at $119.40/bbl., while gold futures hit highs not seen since August 2020—settling at $1,993.90/oz.
All three major U.S. indices booked their fourth straight day of declines on Tuesday, Mar. 8, as investors weighed the impact of a ban of Russian imports. U.S. President Joe Biden announced a ban on Russian oil imports in retaliation for Moscow’s invasion of Ukraine. Front month crude oil prices rose 3.6% to settle at $123.70/bbl.—its highest closing value since Aug. 1, 2008, and front-month gold futures closed up 2.4% to settle at $2,043.30/oz. The 10-year Treasury yield jumped 10 bps to 1.86% as inflation remained a significant concern.
The S&P 500 posted its best one-day return since June 2020 on Wednesday, Mar. 9, 2022, as stocks rose—halting a four-day slide—oil declined, and investors awaited news on Ukraine-Russia talks. The one-day rally occurred after the Russian and Ukrainian foreign ministers agreed to meet in Turkey to find diplomatic solutions to the ongoing hostilities. U.S. lawmakers disclosed a new bill that would fund the government for the remainder of the year as well as provide additional aid to Ukraine. Front-month crude oil futures declined to $108.70/bbl., while gold futures settled at $1,985.90/oz. The 10-year Treasury yield rose eight bps to close the day at 1.94%
Exchange-Traded Equity Funds
Equity ETFs witnessed their fifth consecutive week of net inflows, attracting $18.7 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$19.3 billion), injecting money also for the fifth week in a row. However, for the first week in three, nondomestic equity ETFs witnessed net outflows, handing back $622 million this past week. Large-cap ETFs (+$8.7 billion) attracted the largest draw of net new money, followed by the commodities heavy sector-other ETFs (+$5.1 billion) and small-cap ETFs (+$3.5 billion). Meanwhile, sector-financial/banking ETFs (-$1.9 billion) suffered the largest net redemptions of the equity ETF macro-groups for the flows week.
SPDR S&P 500 ETF (SPY, +$4.0 billion) and iShares Russell 2000 ETF (IWM, +$2.6 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Financial Select Sector SPDR ETF (XLF, -$913 million) experienced the largest individual net redemptions, and iShares US Real Estate ETF (IYR, -$600 million) suffered the second largest net redemptions of the week.
Exchange-Traded Fixed Income Funds
For the third week in a row, taxable fixed income ETFs witnessed net inflows. However, they took in just $446 million this last week. APs were net purchasers of government-Treasury ETFs (+$2.7 billion) and international and global debt ETFs (+$511 million), while being net redeemers of corporate investment-grade debt ETFs (-$1.4 billion), corporate high-yield ETFs (-$1.2 billion), and government-mortgage ETFs (-$229 million). iShares JPM USD Emerging Markets Bond ETF (EMB, +$712 million) and PGIM Ultra Short Bond ETF (PULS, +$616 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares iBoxx $ Investment-Grade Corporate Bond ETF (LQD, -$1.3 billion) and iShares Core US Aggregate Bond ETF (AGG, -$578 million) handed back the largest individual net redemptions for the week.
For the fifth week in six, municipal bond ETFs witnessed net inflows, with investors injecting $572 million this week. JP Morgan Ultra-Short Municipal Income ETF (JMST, +$507 million) witnessed the largest draw of net new money of the municipal bond ETFs, while SPDR Nuveen Bloomberg Municipal Bond ETF (TFI, -$103 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 fifth week in a row—redeeming $6.2 billion—with the macro-group recording a market decline of 3.23% for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly less than $4.1 billion, witnessed their fifth consecutive week of net outflows while experiencing a 2.95% market loss on average for the fund-flows week. Nondomestic equity funds—posting a 3.87% weekly loss on average—observed their second straight week of net outflows, handing back $2.1 billion.
On the domestic equity side, fund investors were net redeemers of large-cap funds (-$3.2 billion) and mid-cap funds (-$480 million). Investors on the nondomestic equity side were net redeemers of international equity funds (-$1.8 billion) and global equity funds (-$292 million) for the week.
Conventional Fixed Income Funds
For the seventh week in a row, taxable bond funds (ex-ETFs) witnessed net outflows—handing back $6.2 billion this past week—while posting a 0.98% loss on average for the fund-flows week. Investors were net purchasers of government-Treasury funds (+$7 million) while being net redeemers of corporate investment-grade debt funds (-$3.9 billion), flexible funds (-$725 million), and international & global debt funds (-$653 million).
The municipal bond funds group posted a 1.02% loss on average during the week and witnessed its ninth consecutive weekly net outflows, handing back $1.2 billion this week and marking its longest stretch of weekly net outflows since the week ended December 19, 2018. General & Insured Municipal Debt Funds (-$369 million) and High Yield Municipal Debt Funds (-$268 million) experienced the largest net outflows of the group.