U.S. Weekly FundFlows Insight Report: Fund Flows Turn Positive For The Week

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Includes: BKLN, IWM, LQD, QQQ, SHV, SHY, SPY, XLK
by: Tom Roseen
Summary

For the first week in three, investors were overall net purchasers of fund assets, injecting $25.3 billion for Lipper's fund flows week ended June 12, 2019.

The broad-based U.S. indices posted their second consecutive week of plus-side returns, as U.S./Mexico trade tensions declined and a weaker-than-expected nonfarm payrolls report had some pundits believing the Fed's next move might be on the accommodative side.

Investors shrugged off that there were no new signs of progress in the U.S./China trade talks and focused, instead, on a more dovish stance by the ECB, which announced that it planned to keep rates unchanged until at least the first half of 2020.

For the first week in three, investors were overall net purchasers of fund assets (including those of conventional funds and ETFs), injecting $25.3 billion for Lipper's fund flows week ended June 12, 2019. Fund investors were net purchasers of money market funds (+$12.9 billion), taxable fixed-income funds (+$7.2 billion), equity funds (+$4.4 billion), and municipal bond funds (+$778 million).

Market Wrap-Up

For the fund flows week ended June 12, 2019, the broad-based U.S. indices posted their second consecutive week of plus-side returns, as U.S./Mexico trade tensions declined and a weaker-than-expected nonfarm payrolls report had some pundits believing the Federal Reserve's next move might be on the accommodative side. Despite Facebook (FB) declining 1.7% on Wednesday, June 12, on news that CEO Mark Zuckerberg knew about data breaches, the tech-heavy NASDAQ Composite Price Only Index (+2.87%) posted the strongest returns of the U.S. indices, followed by the S&P 500 Price Only Index (+1.90%). Overseas, the FTSE 100 Price Only Index (+1.99%) led the way, while the Xetra DAX Total Return Index (+1.65%) posted the second-strongest returns of the frequently followed foreign indices.

On Thursday, June 6, investors pushed the Dow to its longest winning streak - four consecutive days - since March as investors cheered news that the Trump administration was considering delaying the tariffs on imports from Mexico. Investors shrugged off the fact that there were no new signs of progress in the U.S./China trade talks and focused, instead, on a more dovish stance by the European Central Bank, which announced that it planned to keep rates unchanged until at least the first half of 2020. On Friday, the Dow posted its strongest one-week return for the year after the May nonfarm payrolls report came in much softer than analysts' expectations, with the U.S. adding just 75,000 jobs for the month - well below the 185,000 predicted by analysts. Nonetheless, some investors interpreted these results as a precursor to the Fed cutting rates - possibly as soon as this summer - which might be good for markets.

On Monday, June 10, the Dow logged its sixth consecutive upside trading day after Trump tweeted that he suspended plans to impose tariffs on Mexico because the two countries came to terms over stemming the flow of illegal immigrants at the U.S. southern border. However, trade tension continued to grow after China cautioned global technology firms about complying with the ban on Huawei Technologies. On Tuesday, the Dow snapped its winning streak after China's foreign ministry said it would respond firmly if the U.S. insisted on intensifying its impasse with China. The U.S. markets declined once again on Wednesday after investors evaluated a lower-than-expected reading on the Consumer Price Index and continued to closely watch the rhetorical volley between the U.S. and Chinese officials on trade.

Exchange-Traded Equity Funds

For the first week in three, equity ETFs witnessed net inflows, taking in a little less than $9.4 billion for the most recent fund flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$9.8 billion), also for the first week in three. Meanwhile, nondomestic equity ETFs witnessed net outflows for the fifth consecutive week, but only to the tune of $385 million this past week. The SPDR S&P 500 Trust ETF (SPY, +$3.6 billion) and the Invesco QQQ ETF (QQQ, +$1.6 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, the iShares Russell 2000 ETF (IWM, -$334 million) experienced the largest individual net redemptions and the Technology Select Sector SPDR ETF (XLK, -$295 million) suffered the second-largest net redemptions of the week.

Exchange-Traded Fixed-Income Funds

For the fifth week in a row, taxable fixed-income ETFs witnessed net inflows, taking in $7.7 billion. APs were net purchasers of government Treasury ETFs (+$2.8 billion) and corporate investment-grade debt ETFs (+$2.8 billion). The iShares Short Treasury Bond ETF (SHV, +$3.4 billion) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, +$1.4 billion) attracted the largest amounts of net new money of all individual taxable fixed-income ETFs. Meanwhile, the iShares 1-3 Year Treasury Bond ETF (SHY, -$3.0 billion) and the Invesco Senior Loan ETF (BKLN, -$126 million) handed back the largest individual net redemptions for the week. For the first week in 10, municipal bond ETFs witnessed net outflows, handing back $109 million.

Conventional Equity Funds

For the seventeenth consecutive week, conventional fund (ex-ETF) investors were net redeemers of equity funds, withdrawing $4.9 billion. Domestic equity funds, handing back a little less than $2.5 billion, witnessed their eighteenth weekly net outflows, while posting a 1.58% plus-side return on average for the fund flows week. Their nondomestic equity fund counterparts, posting a 1.81% gain on average, witnessed their twelfth consecutive weekly net outflows (-$2.4 billion this past week). On the domestic equity side, fund investors gave a cold shoulder to large-cap funds (-$902 million net) and mid-cap funds (-$513 million), while investors on the nondomestic equity side were net sellers of international equity funds (-$532 million) and global equity funds (-$1.9 billion).

Conventional Fixed-Income Funds

For the fifth consecutive week, taxable bond funds (ex-ETFs) witnessed net outflows, handing back some $514 million this past week, while posting a 0.41% return for the flows week. Investors were net redeemers of balanced funds (-$1.8 billion) and flexible funds (-$467 million), while corporate investment-grade debt funds (+$1.3 billion) and high yield funds (+$368 million) witnessed the largest net inflows of the group. For the twenty-third straight week, municipal bond funds (ex-ETFs) witnessed net inflows - taking in $887 million, while posting a 0.03% loss on average (their first weekly market loss in three).

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.