For the fourth week in a row, investors were overall net purchasers of fund assets (including those of conventional funds and ETFs), injecting $27.3 billion for Lipper’s fund-flows week ended September 25, 2019. Fund investors were net purchasers of money market funds (+$37.8 billion), municipal bond funds (+$1.6 billion), and taxable fixed income funds (+$427 million). However, they were net redeemers of equity funds (-$12.6 billion).
For the fund-flows week ended September 25, 2019, stocks generally suffered negative returns. Even after the Federal Open Market Committee voted to cut its prime lending rate by 25 basis points last Wednesday – which initially was a boon for stocks – concerns over the China/U.S. trade deal, a global economic slowdown, and a new round of impeachment inquiries kept investors in a risk-off mode. The Dow Jones Industrial Average Price Only Index (-0.65%) mitigated losses better than the other broadly followed U.S. indices for the fund-flows week, followed by the S&P 500 Price Only Index (-0.73%), while the NASDAQ Composite Price Only Index (-2.25%) suffered the largest losses. Overseas, the Nikkei 225 Price Only Index posted the only plus-side returns of the subgroup, rising 0.74% for the fund-flows week, while the Xetra DAX Total Return Index (-2.17%) posted the largest one-week decline of the other often followed broad-based global indices.
On Thursday, September 19, stocks started the week on a soft up note after the Federal Reserve Board cut interest rates by 25 bps – to a range of 1.75% to 2.00% – and on better-than-expected housing and manufacturing data. However, news of the possibility of increased tariffs on Chinese goods and concerns about when Saudi Arabia’s oil production would go back online after last weekend’s oil fields attacks kept a lid on upside performance. On Friday, stocks trended lower as investors focused on the state of U.S./China trade talks, quadruple witching day, and the rebalancing of a few often-followed U.S. indices, leading to the first full week decline in a month.
On Monday, September 23, markets ended mixed as investors digested news that eurozone manufacturing contracted more sharply in September than anticipated. Germany’s manufacturing Purchasing Managers Index fell to 41.4 – its lowest reading in 10 years – fanning fears of a global economic slowdown. The S&P 500 suffered its third consecutive trading day of downside performance after President Donald Trump addressed the United Nations General Assembly, criticizing China and taking a hardline stance on Iran. Gold posted its strongest finish in three weeks as the House of Representatives moved closer to pursuing an impeachment inquiry against Trump, creating more uncertainty for investors. In addition, according to the U.S. Conference Board, the consumer confidence index slipped to a three-month low. However, on Wednesday, September 25, stocks closed higher on optimism of a China trade deal. Despite Speaker of the House Nancy Pelosi announcing the start of a formal impeachment inquiry into President Trump on Tuesday, investors cheered comments by Trump that the U.S./China trade deal could happen sooner than expected. In other news, U.S. August home sales increased 7.1%, just falling short of the 12-year high set in June. Oil prices weakened after U.S. government data showed another weekly increase in domestic crude oil inventories and after reports indicated Saudi Arabia had restored most of its crude oil production capacity.
Exchange-Traded Equity Funds
For the first week in four, equity ETFs witnessed net outflows, handing back $3.6 billion for the most recent fund-flows week. Authorized participants (APs) were net redeemers of domestic equity ETFs (-$2.8 billion) for the first week in five. Meanwhile, non-domestic equity ETFs witnessed net outflows for the second week running, handing back $884 million this past week. The SPDR Gold Trust ETF (GLD, +$2.0 billion) and the SPDR S&P 500 Trust ETF (SPY, +$1.3 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, the iShares Core S&P 500 ETF (IVV, -$1.9 billion) experienced the largest individual net redemptions, and the iShares Russell 2000 ETF (IWM, -$1.7 billion) suffered the second largest net redemptions of the week.
Exchange-Traded Fixed Income Funds
For the sixth week in seven, taxable fixed income ETFs witnessed net inflows, taking in $1.8 billion. APs were net purchasers of corporate investment-grade debt ETFs (+$971 million) and government-Treasury ETFs (+$711 million), while being net redeemers of corporate high yield ETFs (+$66 million) and balanced ETFs (-$13 million). The iShares 7-10 Year Treasury Bond ETF (IEF, +$1.1 billion) and the iShares 20+ Year Treasury Bond ETF (TLT, +$1.1 billion) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, the iShares Short Treasury Bond ETF (SHV, -$1.9 million) and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL, -$357 million) handed back the largest individual net redemptions for the week. For the fourteenth week in 15, municipal bond ETFs witnessed net inflows, taking in $276 million.
Conventional Equity Funds
For the thirty-second consecutive week, conventional fund (ex-ETF) investors were net redeemers of equity funds, withdrawing $8.9 billion. Domestic equity funds, handing back a little less than $7.3 billion, witnessed their thirty-third weekly net outflows while posting a 0.88% loss on average for the fund-flows week. Their non-domestic equity fund counterparts, posting a 0.82% loss on average, witnessed their sixth consecutive week of net outflows, handing back some $1.6 billion this past week. On the domestic equity side, fund investors turned their backs on large-cap funds (-$6.3 billion) and small-cap funds (-$664 million), while investors on the non-domestic equity side were net sellers of international equity funds (-$1.0 billion) and global equity funds (-$625 million).
Conventional Fixed Income Funds
For the first week in eight, taxable bond funds (ex-ETFs) witnessed net inflows, handing back some $1.4 billion this past week while posting a 0.00% return for the fund-flows week. Investors were net purchasers of government-mortgage funds (+$170 million) and government-Treasury funds (+$151 million), while flexible funds (-$1.6 billion) and corporate high yield funds (-$192 million) witnessed the largest net outflows of the group. For the thirty-eighth straight week, municipal bond funds (ex-ETFs) witnessed net inflows – taking in $1.4 billion – while posting a 0.43% gain on average for their first weekly market gain in three.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.