For the LSEG Lipper money flow week that ended February 14, 2024, investors were net redeemers of overall fund assets (including both traditional funds and ETFs) in three out of four weeks, resulting in a net $918 million was lost.
Taxable bond funds (+$9 billion, -0.30%), equity funds (+$8 billion, +0.50%), and alternative funds (+$502 million, +0.20%) attracted net new capital.
Money market funds (-$17.5 billion, +0.10%), commodity funds (-645 million, -2.30%), tax-exempt bond funds (-$142 million, -0.10%), and mixed asset funds (- $138 million, -0.20%) reported outflows throughout the week.
Money market funds have seen outflows in four of the past five weeks.
All 10 spot ETFs reported net inflows of $2.4 billion, the largest weekly inflow since their inception.
Index performance
LSEG Lipper Fund Flow At the end of the week, broad US equity indexes reported mixed returns. (-0.65%) fell, while (+0.65%), (+3.17%), and (+0.11%) rose. All black.
The Bloomberg Municipal Bond Total Return Index (-0.12%) and the Bloomberg U.S. Aggregate Bond Total Return Index (-0.84%) both fell this week.
Overseas indices were also mixed: DAX (-0.20%), (-1.44%), (+2.53%), S&P/TSX Composite (-1.02%), (+1.27%).
interest rate/yield
US Treasury yields both (+3.27%) and (+3.65%) rose throughout the week. Although still inverted, the spread hovered around -0.30 for the next 10 days.
The fixed rate average (FRM) has increased for the third of four weeks, with the weekly average now at 6.77%, according to Freddie Mac. (DXY, +0.64%) and (+10.78%) both rose over the week.
The CME FedWatch tool currently says the Fed could cut interest rates by 25 basis points (bps) from the current level of 10.50%. A month ago, the tool predicted a 76.9% chance of a 25 basis point cut. The next meeting is scheduled for March 20, 2024.
Market overview
On Thursday, February 8, the Department of Labor announced that weekly unemployment insurance claims fell by 9,000 to 218,000, while continuing claims fell to 1,871,000. The Fed has made it very clear in recent statements that if the labor market and overall economy remain resilient, there is no need to rush to lower central bank interest rates. The stock market ended the day higher, led by the small-cap-heavy Russell 2000 (+1.50%). Government bond yields also rose slightly, with the 5-year bond yield rising 1.21% and the 10-year bond yield rising 1.00%.
The calendar week ended on Friday, February 9, with the Department of Labor announcing that December's Consumer Price Index (CPI) increase was slightly lower than originally reported. Annual revisions to the CPI were also reported. This shows that core consumer prices rose at an annual rate of 3.3%. Large-cap stocks rose on the news, with Nvidia (NASDAQ:) hitting a new intraday high and the S&P 500 (+0.57%) hitting a new all-time high.
The broader U.S. stock market was mixed on Monday, February 12, including the Nasdaq (-0.30%), S&P 500 (-0.09%), DJIA (+0.33%), and Russell 2000 (+1.75%). US Treasury yields fell on the day, with the 10-year Treasury yield dropping 0.17%.
On Tuesday, February 13, the Labor Department reported that the CPI rose more than expected in January due to an increase in rental housing. The CPI rate of increase was the largest monthly increase in four months (+0.3%). On an annual basis, CPI rose 3.1% after rising 3.4% in the previous month, down from a peak of 9.1% in June 2022. The stock market fell sharply on this news, with the Russell 2000 Index (-3.96%), Nasdaq Index (-1.80%), S&P 500 Index (-1.37%), and DJIA (-1.35%). The two-year bond yield jumped to 3.98%, and the 10-year bond yield jumped to 3.55%.
The money flow week ended on Wednesday, February 14th, with the market rebounding as the Russell 2000 (+2.44%) recouped most of the previous day's losses. Yields on 2-year bonds (-1.63%) and 10-year bonds (-1.23%) also fell, and yields on US bonds normalized. The number of U.S. mortgage applications fell 2.3% last week, after a 3.7% increase in the previous week, the Mortgage Bankers Association (MBA) reported. According to the report, new home purchase applications decreased by 3.0% and refinancing applications decreased by 2.0%.
Listed stock funds
Weekly net inflows into exchange-traded equity funds hit $10.9 billion, the third consecutive week of inflows compared to the previous four weeks. The macro group recorded a weekly gain of 0.40%, the third of four.
Large-cap ETFs (+$7.2 billion), small-cap ETFs (+$1.2 billion), and equity income ETFs (+$765 million) attracted the largest inflows among the equity ETF subgroups. Large-cap ETFs recorded the biggest weekly inflows of 2024.
Among equity ETFs, only developed market ETFs (-$192 million) and sector equity ETFs (-$167 million) had weekly outflows. Developed market ETFs recorded their first weekly outflows in four years.
Here are the top two drivers of equity ETF flows over the past week: SPDR S&P 500 ETF Trust (ASX:) (spy+$3.8 billion) and SPDR Portfolio S&P 500 ETF (NYSE:) (SPLG+$2.2 billion).
On the other hand, the bottom two stock ETFs in terms of weekly outflows are: Consumer Essentials Select Sector SPDR Fund (NYSE:) (XLP-893 million) and iShares Russell 2000 ETF (NYSE:) (I.W.M.-$872 million).
Exchange traded bond funds
Weekly inflows into exchange-traded taxable bond funds reached $7.2 billion, the macro group's eighth consecutive year of inflows. Bond ETF returns were slightly negative at an average of 0.00%, marking the sixth loss in seven weeks.
Alternative Bond Funds (+$2.4 billion), General Domestic Taxable Bond ETFs (+$2.3 billion), and Government/Treasury Bond ETFs (+$1.5 billion) were the top taxable bond ETF sub-subs with observed inflows. It became a group. Weekly inflows into alternative bond funds, including Bitcoin ETFs, were the largest on record, excluding the week of January 17, 2024, when GBTC converted from OTC to ETF.
High Yield ETFs (-$357 million), Emerging Markets Bond ETFs (-$86 million), and World Income Funds (-$15 million) were the only subgroups to record net outflows. This was the first week in three weeks that high-yield ETFs experienced outflows.
Municipal bond ETFs reported $471 million in outflows this week, the fifth such outflow in the past seven weeks.
iShares Bitcoin Trust (NASDAQ:) (ibit+$1.4 billion) and Fidelity Wise Origin Bitcoin Fund (NYSE:) (FBTC+$788 million) attracted the largest weekly net new capital of any taxable bond ETF.
on the other hand, iShares iBoxx Dollar High Yield Corporate Bond ETF (NYSE:) (HYG-$631 million) and Grayscale Bitcoin Trust (BTC) (NYSE:) (GBTC, -$412 million) had the largest weekly outflow under all taxable bond ETFs. This was the smallest weekly outflow of GBTC since its conversion to an ETF.
traditional stock funds
Traditional stock funds (formerly ETFs) recorded weekly outflows (-$2.8 billion) for the 15th consecutive week. Traditional stock funds' weekly return was -0.60%, marking the second week of gains in three weeks.
The only subgroups of traditional equity funds that achieved weekly inflows were small-cap funds (+$441 million) and developed international markets funds (+$324 million). This was the third weekly inflow into small-cap mutual funds in the past five weeks. This was the largest weekly inflow into small-cap traditional mutual funds in more than a year.
The top subgroups reporting weekly outflows were large-cap funds (-$1.3 billion), mid-cap funds (-$1 billion), and equity income funds (-$664 million). Large investment trusts saw outflows in 19 of the past 20 weeks.
traditional bond funds
Traditional taxable bond funds posted weekly inflows of $1.7 billion, marking the seventh consecutive week of inflows. The macro group averaged -0.50%, marking the sixth return below zero in seven weeks.
The top subgroups with inflows this week were short/intermediate investment grade funds (+$953 million), general domestic taxable bond funds (+$468 million), and high yield funds (+269 million dollars). Inflows into short-term/medium-term investment grade mutual funds were observed for seven consecutive weeks.
Among the traditional taxable bond subgroups, only short/middle government and Treasury funds (-$221 million) experienced outflows in the subsequent week. Government and Treasury short-term/intermediate-term mutual funds have had three weeks of outflows in the past four weeks, while they have recorded negative performance for five weeks in the past seven years.
The municipal bond conventional fund (formerly ETF) had a weekly cash flow return of -0.10%, marking the sixth week of negative returns compared to the previous seven weeks. This subgroup had inflows of $329 million, the seventh consecutive week of inflows.
