For the Lipper Refinitive fund-flows week ended March 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 January 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, March 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 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 March 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 ETFs and mutual fund investors collectively padded the coffers of large-cap funds – injecting a net $ 5.5 billion – with SPDR S&P 500 ETF (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, March 9), which of late has been an antagonist to fund flows into tech-related funds, Science & Technology 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.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.