During the week ending Oct. 9, U.S. equity funds experienced outflows as investors realized profits amidst a change in market projections regarding the Federal Reserve’s rate cut trajectory and a spike in bond yields.
As per LSEG data, investors divested a net total of $342 million from U.S. equity funds during the week, following a significant $30.86 billion in purchases the week before.
Last week, investors revised their expectations for future Fed rate reductions after an unexpectedly strong U.S. nonfarm payrolls report for the prior month.
The 10-year U.S. Treasury yield hit a 2-1/2 month peak of 4.12% on Thursday, which dampened earnings expectations for large-cap growth equities.
U.S. large-cap funds saw net outflows of $4.25 billion, a stark contrast to the $35.47 billion in net inflows from the previous week. Mid-cap funds were also offloaded by $919 million, while multi-cap and small-cap funds attracted $197 million and $118 million, respectively.
Conversely, sectoral equity funds drew in inflows totaling $730 million, with notable contributions from tech, as well as metals and mining sectors, garnering $639 million and $251 million, respectively.
Meanwhile, U.S. bond funds marked their 19th consecutive week of inflows, amassing approximately $3.37 billion on a net basis.
Short-to-intermediate investment-grade funds attracted a robust $1.5 billion, marking the fourth straight week of inflows. U.S. investors also invested a net of $1.06 billion in general domestic taxable funds and $682 million in loan participation funds.
Simultaneously, money market funds recorded net investments of $2.54 billion, continuing a trend of three consecutive weeks of net purchases.
Global investment in money market funds surged in the week to Oct. 9 as a result of revised Federal Reserve rate cut expectations and concerns regarding the Middle East situation.
Investors also funneled money into liquid money market funds, awaiting anticipated updates on stimulus measures from Beijing this weekend.
According to LSEG data, global money market funds attracted a net inflow of $24.55 billion over the week, following a prior week’s net purchases amounting to roughly $22.78 billion.
Investors recalibrated their outlooks on impending Fed rate cuts last week in response to a stronger-than-expected U.S. nonfarm payrolls report for the previous month, which heightened the demand for low-risk investments.
Asian money market funds recorded a substantial inflow of $12.88 billion, the highest since Jan. 10. European and U.S. funds also saw net purchases amounting to $7.78 billion and $2.54 billion, respectively.
In contrast, interest in riskier equity funds weakened, with just $3.65 billion invested in global equity funds, compared to $35.97 billion in the previous week.
Throughout this period, tech, financials, and metals and mining sector funds collected notable inflows of $572 million, $417 million, and $148 million, respectively, while the healthcare sector faced net outflows of $520 million.
Overseas China equity funds experienced a significant $8.52 billion inflow, marking the highest weekly amount since at least December 2020.
Global bond funds continued to attract investments for the 42nd week in a row, bringing in $12.43 billion.
Investors acquired short-term bond funds with a net inflow of $2.16 billion, following the previous week’s net sales of $3.3 billion. Government, high yield, and loan participation funds saw net purchases of $1.96 billion, $906 million, and $737 million, respectively.
Gold and other precious metal funds maintained their attractiveness for a ninth consecutive week with approximately $780 million in inflows. Conversely, energy funds faced a slight outflow of $11 million.
Data from 29,545 emerging market funds indicated that equity funds attracted a substantial $8.55 billion, the most significant amount since January 2021, while bond funds saw $1.76 billion in purchases.
