During LSEG Lipper’s fund-flows week that ended November 15, 2023, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the fourth week in a row, adding a net $29.4 billion.
Money market funds (+$14.8 billion, +0.10%), equity funds (+$10.0 billion, +3.19%), taxable bond funds (+$4.7 billion, +0.15%), alternative investment funds (+$377 million, -0.29%), and commodities funds (+$202 million) all attracted new capital. Mixed-assets funds (-$439 million) and tax-exempt bond funds (-$235 million, +0.74%) suffered outflows over the week.
Index Performance
At the close of LSEG Lipper’s fund-flows week, U.S. broad-based equity indices reported positive returns—the Dow Jones Industrial Average (+2.58%), Nasdaq (+3.32%), Russell 2000 (+5.08%), and S&P 500 (+2.74%) were all up for the week, marking a third consecutive week of gains.
The Bloomberg Municipal Bond Total Return Index (+0.75%) rose over the week, while the Bloomberg U.S. Aggregate Bond Total Return Index (-0.01%) fell.
Overseas indices traded up—the DAX (+4.95%), FTSE 100 (+2.43%), Nikkei 225 (+4.17%), S&P/TSX Composite (+1.17%), and Shanghai Composite (+1.17%) were all in the black.
Rates/Yields
The 2-year Treasury yield fell 0.20% while the 10-year rose 0.71% over the course of the week.
According to Freddie Mac, the 30-year fixed-rate average (FRM) fell for the third straight week—the weekly average is currently at 7.44%. Both the United States Dollar Index (DXY, -1.14%) and the VIX (-1.90%) fell slightly over the course of the week.
The CME FedWatch Tool currently has the likelihood of the Federal Reserve keeping interest rates at current levels at 99.8%. This tool forecasted a 32.7% possibility of a 25-basis point (bps) hike one month ago. The next meeting is scheduled for December 13, 2023.
Market Recap
Our fund-flows week kicked off on Thursday, November 9, with the Department of Labor reporting initial claims for state unemployment benefits fell 3,000 to 217,000 last week—slightly below economists’ forecasts. The report highlighted 1.8 million workers continue to claim unemployment benefits and an unemployment rate of 3.9%, the highest level since January 2022. At a conference hosted by the International Monetary Fund (IMF), Federal Reserve Chair Jerome Powell left the door open for additional rate hikes saying,
“We know that ongoing progress toward our 2% goal is not assured, Inflation has given us a few head fakes…If it becomes appropriate to tighten policy further, we will not hesitate to do so.”
Treasury yields rose on the day, with the 2-year, 5-year, and 10-year yields increasing by 2.21%, 3.05%, and 2.77%, respectively. Equity markets struggled on the day—the Russell 2000 (-1.57%), Nasdaq (-0.94%), S&P 500 (-0.81%), and DJIA (-0.65%) were all down.
On Friday, November 10, the University of Michigan’s preliminary reading of its Consumer Sentiment Index dropped from 63.8 to 60.4, marking the lowest level since May. Treasury yields at the short end rose slightly while longer tenured yields fell—two-year (+0.34%) and 10-year Treasury yield (-0.39%). Equity markets finished the calendar week on a high note—the Nasdaq (+2.05%), S&P 500 (+1.56%), DJIA (+1.15%), and Russell 2000 (+1.07%) were all up.
On Monday, November 13, equity markets traded mixed with the DJIA (+0.16%) and Russell 2000 (+0.01%) ending the day in the black. The Nasdaq (-0.22%) and S&P 500 (-0.08%) fell on the day. The two-year Treasury yield fell 0.67% as both the 10- and 30-year yields rose 0.17% and 0.23%, respectively.
On Tuesday, November 14, the Department of Labor released its consumer price index report for October. The print showed prices were unchanged during the month and the annual rise in inflation was at the lowest level in two years. The Consumer Price Index (CPI) increased 3.2% year on year, and core-CPI rose 4.0%. Gasoline prices fell 5.0% while food prices rose 0.3% after increasing 0.2% in the prior three months. Treasury yields fell significantly across the curve—the two-year yield decreased by 4.04%, its largest single-day drop since April 25, 2023. Equity markets rallied on the day with the small-cap focused Russell 2000 (+5.44%) leading the way.
Our fund-flows week wrapped up Wednesday, November 15, when the Department of Commerce reported that retail sales dipped 0.1% last month, marking the first monthly decline in seven months. The report highlights a slowing in demand which was also captured by the largest decrease in producer prices in over three years. Equity markets traded slightly up, while short-term Treasury yields increased by more than 2.0%
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $15.9 billion in weekly net inflows, the seventh straight week when ETFs attracted new capital. The macro-group posted a 3.27% gain on the week, its third consecutive week in the black.
Large-cap ETFs (+9.1 billion), small-cap ETFs (+$2.0 billion), and sector equity ETFs (+$1.8 billion) attracted the top inflows among the equity ETF subgroups. Large-cap ETFs reported their eighth straight weekly inflow, while realizing their third gain (+3.16%) in as many weeks.
Developed international markets ETFs (-$216 million) and developed global market ETFs (-$101 million) suffered the only weekly outflows under equity ETFs. For developed international markets ETFs, this was the third weekly outflow in four despite three straight positive weekly returns.
All subgroups recorded gains on the week.
Over the past fund-flows week, the two top equity ETF flow attractors were Invesco QQQ Trust Series 1 (NASDAQ:QQQ) (QQQ, +$4.5 billion) and iShares Russell Top 2000 Fund (NYSE:IWM) (IWM, +$1.4 billion).
Meanwhile, the bottom two equity ETFs in terms of weekly outflows were Direxion Daily Semiconductor Bull 3X Shares (NYSE:SOXL) (SOXL, -$429 million) and ProShares UltraPro QQQ (NASDAQ:TQQQ) (TQQQ, -$412 million).
Exchange-Traded Fixed Income Funds
Exchange-traded taxable fixed income funds observed a $6.70 billion weekly inflow—the macro-group’s sixth straight weekly inflow. Fixed income ETFs reported a return of positive 0.09% on average, their third consecutive positive weekly return.
High yield ETFs (+$4.6 billion), general domestic taxable fixed income ETFs (+$1.0 billion), and U.S. government & Treasury fixed income ETFs (+$742 million) were the three top subgroups to see net inflows. After logging a record-breaking weekly inflow last week, high yield ETFs posted their second largest weekly inflow.
U.S. short/intermediate government & Treasury fixed income ETFs (-$968 million) was the only subgroup under taxable bond ETFs to observe outflows. After eight straight weeks of inflows, the subgroup has logged two straight weekly outflows as well as its first negative week of performance in four.
Municipal bond ETFs reported a $712 million inflow over the week, marking their tenth straight week attracting new capital. The subgroup realized a positive 0.72% return—the third straight week of gains.
SPDR Bloomberg High Yield Bond ETF (NYSE:JNK) (JNK, +$1.8 billion) and iShares iBoxx $High Yield Corporate Bond ETF (NYSE:HYG) (HYG, +$1.6 billion) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, iShares® 0-3 Month Treasury Bond ETF (NYSE:SGOV) (SGOV, -$387 million) and Goldman Sachs Access Treasury 0-1 Year ETF (NYSE:GBIL) (GBIL, -$358 million) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$6.0 billion) for the ninety-second straight week. Conventional equity funds posted a weekly return of positive 3.11%, the third consecutive week of gains.
Mid-cap funds (-$1.1 billion), equity income funds (-$988 million), and developed international markets funds (-$984 million) were the top conventional equity fund subgroups to realize weekly outflows. Mid-cap funds have suffered 49 straight weekly outflows, despite realizing gains on the week (+1.81%).
No subgroup under equity mutual funds recorded weekly inflows.
Conventional Fixed Income Funds
Conventional taxable-fixed income funds realized a weekly outflow of $2.0 billion—marking their tenth consecutive weekly outflow. The macro-group logged a positive 0.19% on average—their third straight weekly gain.
Short/intermediate investment-grade funds (-$1.1 billion), general domestic taxable fixed income (-$216 million), and world income funds (-$179 million) suffered the top outflows among conventional taxable fixed income subgroups over the trailing week. Short/intermediate investment grade funds have seen 10 straight weekly outflows while recording three consecutive weekly gains.
No subgroup under taxable fixed-income mutual funds recorded weekly inflows.
Municipal bond conventional funds (ex-ETFs) returned a positive 0.74% over the fund-flows week, marking three straight weeks of plus-side returns. The subgroup experienced a $947 million outflow, marking the fifteenth straight weekly outflow.