For the Lipper Refinitiv fund-flows week ended Mar. 9, 2022, equity funds took it on the chin, declining 2.27%, and on a year-to-date basis, losing 9.73% on average. Markets were roiled during the fund-flows week as investors considered the impacts that skyrocketing commodity prices, the Russia-Ukraine conflict, and Federal Reserve policies might have on the global economy and markets.
The Dow Jones Industrial Average entered market correction territory, declining 11% from its Jan. 4 record high, while the NASDAQ Composite entered bear market territory, declining more than 20% from its November 2021 highs during the fund-flows week. Some of those deep losses were partially offset by a strong one-day turnaround for stocks on Wednesday, Mar. 9, as stocks rose, oil declined, and investors awaited news on Ukraine-Russia talks. The one-day rally occurred after the Russian and Ukrainian foreign ministers agreed to meet in Turkey to find diplomatic solutions to the ongoing hostilities.
With gasoline prices jumping 38% in February from a year ago, food prices rising 8.6%, and the February consumer price index rising 7.9%—a 40-year high—it’s of little wonder that investors are focusing on inflation-related products. And while front-month crude oil future prices declined to $108.70 per barrel (bbl) on Wednesday from the weekly high of $123.70/bbl a day before, inflation-sensitive fund classifications thrived during the week.
The Precious Metals Equity Funds classification (gold miners and the like) posted the strongest weekly returns in the equity universe, rising 7.04%, followed by Natural Resources Funds (+5.84%), Alternative Energy Funds (+4.24%), Commodities Precious Metals Funds (+3.44%), and Global Natural Resources Funds (+3.33%).
On the flip side, China Region Funds (-7.64%) took the biggest drubbing during the week, bettered by Pacific ex-Japan Funds (-5.05%), Emerging Markets Funds (-4.88%), and Global Science & Technology Funds (-4.67%).
Investors were overall net redeemers of fund assets (including those of conventional funds and ETFs) for the first week in three, withdrawing a net $20.2 billion for the Refinitiv Lipper’s fund-flows week ended Mar. 9, 2022. Fund investors were net purchasers of equity funds (+$12.5 billion) while being net redeemers of money market funds (-$26.2 billion), taxable bond funds (-$5.8 billion), and tax-exempt fixed income funds (-$662 million) for the week.
While both ETF and mutual fund investors collectively padded the coffers of large-cap funds—injecting a net $5.5 billion—with SPDR® S&P 500 (NYSE:SPY) (SPY, +$4.0 billion) attracting the largest net inflows for the flows week of all the individual funds, the commodities heavy sector-other macro-group took in the next largest sum, attracting a net $5.3 billion, bringing its weekly net inflow streak to five consecutive weeks and its second-largest weekly net inflows on record extending back to 1992.
Despite a late-week spike in the 10-year Treasury yield (a rise of 10 basis points to 1.86% on Wednesday, Mar. 9), which of late has been an antagonist to fund flows into tech-related funds, Science & Technolgy Funds (+$1.4 billion, including ETFs) witnessed the largest net inflows of the sector equity funds macro-group for the flows week, followed by Commodities Precious Metals Funds (+$1.3 billion), Natural Resources Funds (+$1.2 billion), Commodities General Funds (+$1.1 billion), Basic Materials Funds (+$810 million), and Commodities Agriculture Funds (+$720 million).
Most pundits feel that inflation is here to stay, at least for a while. With the rise in demand post-COVID, continued supply chain bottlenecks, and the Russia-Ukraine conflict providing an extreme amount of pressure on oil, gas, grain, and basic materials, along with the humanitarian concerns, investors are likely to continue to keep a keen eye on these inflation-sensitive securities.