Lipper's fund asset groups (including both mutual funds and ETFs) suffered net outflows of $40.2 billion for the abbreviated fund-flows trading week ended Tuesday, December 4. Markets were closed on Wednesday, December 5, in accordance with the national day of mourning to honor the late former President George H.W. Bush. All four asset classes suffered negative net flows paced by money market funds (-$34.4 billion) while taxable bond funds, municipal bond funds, and equity funds saw $4.8 billion, $692 million, and $289 million leave their coffers, respectively.
The S&P 500 Index (-1.59%) and the Dow Jones Industrial Average (-1.34%) both retreated during the fund-flows trading week. This negative performance reduced the year to date gains for the Dow and the S&P 500 to 1.25% and 0.99%. Both markets suffered the lion's share of their losses on the last trading day of the week due to the impact of a flattening yield curve and investor concerns about the trade tensions between the U.S. and China. The spread between the two-year yield and ten-year yield narrowed to its slimmest margin (11 basis points) since June 2007. The markets took notice as the yield curve approached inversion (short-dated yields higher than longer-dated ones) as an inverted yield curve has been a reliable predictor of recessions in the past. The G-20 meeting in Argentina ended without any specific concessions from China, which raised speculation that the U.S. and China would not finalize a deal and the trade war between the two countries would continue.
ETFs had positive net inflows (+$12.6 billion) for the seventh consecutive week. The lion's share of the net inflows were attributable to equity ETFs (+$12.1 billion), with muni bond ETFs and taxable bond ETFs contributing $258 million and $158 million to the total net inflows. The largest net inflows among individual equity ETFs belonged to the SPDR S&P 500 ETF (SPY, +$3.2 billion) and the iShares Core MSCI Emerging Markets ETF (IEMG, +$1.3 billion). The net inflows for the muni debt ETF group were heavily concentrated with the iShares National Municipal Bond ETF (NYSEARCA:MUB) accounting for $325 million in positive net flows while the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, +$220 million) had the largest net inflow in the taxable bond ETF group.
Equity Mutual Funds
Equity mutual funds suffered net outflows (-$12.4 billion) for a twenty-fourth consecutive week. During this time frame, the group had negative net flows of over $108 billion. Both domestic equity funds (-$8.3 billion) and non-domestic equity funds (-$4.1 billion) saw money leave their coffers this week. Domestic equity funds were also responsible (-$75.3 billion) for the majority of the net outflows during the twenty-four week losing streak.
Fixed Income Mutual Funds
Both the taxable bond (-$5.0 billion) and muni debt (-$1.0 billion) mutual fund groups suffered net outflows for the second straight week. The net outflows on the taxable bond side of the ledger were almost universal as twenty-seven out of thirty-two peer groups saw money leave with the largest belonging to the Loan Participation Funds (-$1.1 billion) classification. The General Muni Debt Fund peer group (-$548 million) posted the largest net outflow for muni debt funds.
Money Market Mutual Funds
The net outflows for money market funds (-$34.4 billion) were the third largest this year and the most since the fund-flows week ended June 20 (-$51.0 billion). The Institutional U.S. Government Money Market Funds (-$17.1 billion) and Institutional U.S. Treasury Money Market Funds (-$10.7 billion) were responsible for most of this week's net outflows.
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