During Refinitiv Lipper’s fund-flows week ended February 9, 2022, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) second straight week, withdrawing a net $ 16.6 billion.
Headline outflows were solely caused by redemptions from money market funds (- $ 33.4 billion). Equity funds (+15.9 billion), taxable bond funds (+ $ 655 million), and tax-exempt bond funds (+ $ 216 million) all managed to attract new capital over the week.
At the close of Refinitiv Lipper’s fund-flows week, US broad-based equity indices, for the most part, recorded positive weekly performance. The Russell 2000 (+ 2.66%), NASDAQ (+ 0.51%), and DJIA (+ 0.39%) logged plus-side performance for the second week in a row. The S&P 500 finished slightly down (-0.05%).
The Bloomberg US Aggregate Bond Total Return Index suffered mightily, reporting a negative 1.17% -marking the index’s worst weekly performance in 100 weeks. The Bloomberg Municipal Bond Total Return Index also declined (-0.17%) – the sixth straight week in the red.
Overseas broad market indices traded mixed. The Nikkei 225 depreciated (-0.76%) over the Lipper fund-flows week, while the Shanghai Composite (+ 3.60%), FTSE 100 (+ 0.66%), and DAX 30 (+ 0.31%) closed in the black.
Rates / Yields
The Treasury yield curve continued to flatten over the week — the two- and three-year Treasury yields rose 16.61% and 17.86%, respectively. The 10-two Treasury yield spread fell another 4.75%, touching its lowest level in more than one year.
As of February, the US 30-year fixed-rate mortgage average remained flat at 3.55%. Both the United States Dollar Index (DXY, -0.46%) and VIX (-10.78%) dropped over the week.
Our fund-flows week kicked off Thursday, February 3, on what turned out to be a tough day for US equity markets. Shares of Facebook (NASDAQ: FB) fell more than 25%, leading to the NASDAQ (-3.74%) registering its worst daily performance since March 2020. The S&P 500 also struggled, falling 2.44% -marking its worst session in nearly one year. Crude oil touched a new seven-year high as it topped $ 90 per barrel. The Department of Labor’s (DOL) weekly jobless claims report highlighted 238,000 new initial claims and 1,628 million continuing claims. Internationally, the Bank of England (BOE) increased interest rates again (+ 0.25%). The vote to increase the main Bank Rate to 0.50% marks the first time the central bank increased rates in back-to-back meetings since 2004.
On Friday, February 4, short-term Treasury yields spiked — the two- and three-year yields rose 10.91% and 9.53%, respectively. This was the largest single-day jump for the two-year Treasury yield since the end of November 2021. The AAA gas price website reported the average price of a gallon of gasoline is now $ 3.42-the highest average since September 2014. Recent cold weather in the US paired with rising tensions between Russia (OPEC + member) and Ukraine have put a tremendous strain on the industry. Despite last week’s poor private payroll report released by ADP, the DOL showed a surprising increase in January job growth (+467,000). The unemployment rate increased to 4.0% in January (from December’s 3.9%), however, it is down 2.4% over the year. The NASDAQ (+ 1.58%) regained some of Thursday’s losses as it led all US broad-based equity indices on the day.
On Monday, February 7, US equity markets traded mixed despite Friday’s surprisingly positive January jobs’ report-Russell (+ 0.51%), DJIA (+ 0.00%), S&P 500 (-0.37%), and NASDAQ (-0.58%). On the real estate front, the Fannie Mae Home Purchase Sentiment Index (HPSI) reported a record high 70% of those surveyed believe it is currently a bad time to buy. Rising prices, lack of inventory, and mortgage rate increases have caused the overall HSPI to decline to 71.8-its lowest level since May 2020. Treasury yields fell on the day for the first time in three days.
On Tuesday, February 8, the 10-year Treasury note hit 1.96%, which is the highest level in more than two years. The Russell 2000 (+ 1.63%), NASDAQ (+ 1.28%), DJIA (+ 1.06%), and S&P 500 (+ 0.84%) all appreciated on the day. Oil futures fell to less than $ 90 per barrel. A market for small business optimism, the National Federation of Independent Business (MFIB) index, fell to 97.1. The primary concern was none other than inflation, as 61% of the surveyed businesses cited raising their average selling price.
Our fund-flows week wrapped up Wednesday, February 9, with the US equity market logging broad gains for the second straight day-NASDAQ (+ 2.08%) and Russell 2000 (+ 1.86%) led on the day. The 10-year Treasury yield fell 1.38% on the day. Right now, markets continue to move higher based on the positive earnings reports, but investors remain hesitant as they await Thursday’s Consumer Price Index (CPI) report that is expected to report yet another significant year-over-year jump. The Federal Reserve is expected to increase interest rates next month, and a poor CPI report will add fuel to that fire.
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $ 17.4 billion in weekly net inflows, marking their second time reporting inflows in three weeks. The macro-group posted their second straight weekly performance (+ 0.73%) on average.
Growth / value large-cap ETFs (+ $ 10.4 billion), equity income funds ETFs (+ $ 4.0 billion), international equity ETFs (+ $ 2.7 billion), and sector-financial / banking ETFs (+ $ 1.6 billion) were the four largest equity ETFs subgroups to post inflows this week. Growth / value large-cap ETFs had a reversal trend, as they ended a three-week stretch of outflows greater than $ 8 billion. The weekly inflow by the subgroup was the largest since the second week last December.
Growth / value small-cap ETFs (- $ 2.1 billion), sector-technology ETFs (- $ 502 million), sector-real estate ETFs (- $ 402 million), and sector-healthcare / biotech ETFs (- $ 385 million) were the top flow detractors under the macro-group. Despite the Russell 2000’s strong weekly performance, growth / value small-cap ETFs have reported back-to-back weeks of significant outflows. Their four-week flow moving average has hit its lowest level since last August.
Over the past fund-flows week, the top three equity ETF flow attractors were iShares: Core S&P 500 (NYSEARCA: IVV) (+ $ 4.8 billion), SPDR S&P 500 ETF (NYSEARCA: SPY) (+ $ 2.8 billion), and Schwab: US Dividend Equity ETF (NYSEARCA: SCHD) (+ $ 1.8 billion).
Meanwhile, the bottom three equity ETFs in terms of weekly outflows iShares: Russell 2000 ETF (NYSEARCA: IWM) (- $ 1.6 billion), iShares: S&P Mid-Cap 400 Value (NYSEARCA: IJJ) (- $ 851 million), and iShares: MSCI USA Value Factor (BATS: VLUE) (- $ 815 million).
Exchange-Traded Fixed Income Funds
Exchange-traded fixed income funds observed $ 1.7 billion in weekly net inflows — the macro group’s second week of inflows in three. Fixed income ETFs reported a weekly return of negative 0.02% on average. The inflow marks the largest weekly intake in seven weeks.
Government-Treasury ETFs (+ $ 2.0 billion), flexible funds ETFs (+ $ 437 million), and corporate-investment grade ETFs (+ $ 419 million) were the top attractors of capital under fixed income ETFs. Government-Treasury ETFs realized a positive 0.37% on average over the week as they took in their largest weekly inflows in 10 weeks.
Corporate-high yield ETFs (- $ 822 million), international & global debt ETFs (- $ 188 million), and government-mortgage ETFs (- $ 49 million) witnessed the largest outflows under the fixed income ETF macro-group. Corporate-high yield ETFs have reported their fifth consecutive week of outflows after suffering their sixth straight week of negative performance. The subgroup average performance of negative 0.72% was the lowest weekly performance since November 2021.
iShares: 0-3 Month Treasury Bond ETF (SGOV) (+ $ 760 million) and SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) (+ $ 649 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs .
On the other hand, iShares: iBoxx $ Investment Grade Corporates (NYSEARCA: LQD) (- $ 855 million) and iShares: TIPS Bond ETF (NYSEARCA: TIP) (- $ 793 million) suffered the largest net weekly outflows.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-1.6 billion) for the second week in three. Conventional equity funds posted a weekly return of positive 0.73% on average, their second consecutive week returning plus-side performance.
Growth / value large-cap funds (- $ 1.2 billion), gold and natural resources funds (- $ 751 million), and global equity funds (- $ 586 million) were the largest subgroup outflows under conventional equity funds. After coming off their largest weekly performance since April 2020, growth / value large-cap funds posted their second week of outflows in three, causing their four-week flow moving average to be negative for the third straight week.
International equity (+ $ 1.2 billion), sector-other (+ $ 317 million), and sector-energy (+ $ 23 million) funds were the top subgroups in weekly inflows under conventional equity funds. Conventional international equity funds observed their eighth straight week of inflows while realizing a positive 0.78% in weekly performance. The subgroup’s four-week moving average has remained above the $ 1.4 billion mark for five straight weeks. International equity funds have posted their largest January intake since 2018.
Conventional Fixed Income Funds
Conventional fixed income funds realized a weekly outflow of $ 1.1 billion — marking their third straight week of outflows. The subgroup reported a weekly performance of negative 0.61% on average.
Corporate high-yield (- $ 1.1 billion), international & global debt (- $ 410 million), and government-mortgage (- $ 242 million) funds led the macro-group in outflows. Conventional corporate high-yield funds have suffered five consecutive weeks of outflows as they realized a negative weekly performance of 0.76% -their worst weekly performance in 68 weeks. The subgroup hit its lowest four-week flow moving average since the first week of June 2021.
Corporate investment-grade (+ $ 664 million), balanced funds (+ $ 141 million), and government-Treasury & mortgage conventional funds were the only subgroups to witness weekly inflows under this macro-group. Corporate investment-grade conventional funds logged their first weekly inflow in three weeks despite suffering their worst weekly performance since March 2020.
Municipal bond funds (ex-ETFs) returned negative 0.30% over the fund-flows week — their fifth straight week of negative performance. The subgroup experienced $ 539 million in outflows, marking their fifth week in a row of outflows. Conventional municipal bond funds only recorded five total weeks of net outflows in all of 2021.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.