Image source: PixabayDuring LSEG Lipper’s fund-flow week that ended November 29, 2023, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the sixth week in a row, adding a net $63.6 billion, marking the largest total weekly inflow since the week ending March 15, 2023.Money market funds (+$67.9 billion, +0.10%), and alternative investment funds (+$98 million, -0.02%) were the only attracters of net new capital. Equity funds (-$2.8 billion, +0.21%), taxable bond funds (-$873 million, +0.93%), commodities funds (-$481 million, +2.01%), mixed-assets funds (-$249 million, +0.44%) and tax-exempt bond funds (-$64 million, +1.08%) suffered outflows over the week.
Index Performance
At the close of LSEG Lipper’s fund-flows week, U.S. broad-based equity indices reported mixed returns—DJIA (+0.45 %), Nasdaq (-0.05%), Russell 2000 (+0.46%), and S&P 500 (-0.13%).Both the Bloomberg Municipal Bond Total Return Index (+1.36%) and Bloomberg U.S. Aggregate Bond Total Return Index (+1.14%) rose over the week.Overseas indices traded mostly up—DAX (+2.32%), FTSE 100 (+1.27%), Nikkei 225 (+1.16%), S&P/TSX Composite (+1.16%), and Shanghai Composite (-0.40%).
Rates/Yields
Both the two- (-5.32%) and 10- (-3.33%) year fell over the course of the week as investors anticipate the market has hit peak interest rate levels.According to Freddie Mac, the 30-year fixed-rate average (FRM) fell for the fifth straight week—the weekly average is currently at 7.22%. The United States Dollar Index (DXY, -1.06%) fell, while the VIX (+1.00%) increased 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 95.6%. This tool forecasted a 24.6% possibility of a 25-basis point (bps) hike one month ago. The next meeting is scheduled for December 13, 2023.
Market Recap
On Thursday, November 23, markets were closed for the Thanksgiving holiday.The calendar week ended Friday, November 24, a shortened day for markets, with equity markets trading mostly positive—Russell 2000 (+0.67%), DJIA (+0.33%), S&P 500 (+0.06%), and Nasdaq (-0.11%). Treasury market saw yields rise slightly with the two- (+1.04%) and 10- (+1.63%) both edging up. S&P Global published their Flash US Composite PMI report which showed a small increase in the new orders index from 49.0 to 50.4, marking an end to three straight monthly declines. The US Manufacturing PMI posted a 49.4 in November which was down from 50.0 in October and signals the fastest deterioration in the sector since August. Lack of substantial growth was partially attributed to U.S. companies lowering their workforce during the month for the first time in more than three years. The report states, “ Although only fractional, employment tipped into contractionary territory following the first drop in service sector headcounts since June 2020.” Companies referenced lower demand, higher costs, and hiring freezes as reasons for lay-offs and lack of hiring.On Monday, November 27, The Department of Commerce reported that sales of new U.S. single-family homes fell more than expected—new home sales fell by 5.6% to a seasonally adjusted annual rate of 679,000. Sales increased 17.7% on year-over-year basis. Both equity markets and Treasury yields fell on the day. Equity markets were led by the Russell 3000 (-0.35%), while the 10-year fell 2.25%.On Tuesday, November 28, the Conference Board published that its consumer confidence index improved from 99.1 in October to 102.0 this month. The improvement was suggested to come from households aged 55 and up, while the age group of 35-54 were less optimistic. The survey’s expectation index, which is based on consumers’ short-term outlook for income, business, and labor market conditions increased from 72.7 to 77.8—a reading below 80 has historically been linked to a recession within the next 12 months. Data was also released by the S&P CoreLogic Case-Shiller Index which showed that for September 15 of the 20 major metro markets reported month-over-month price increases. Equity markets traded mixed, with the Russell 2000 falling for the second straight day. Short-term Treasury yields fell on the day—the two- (-2.76%) and three-year (-2.37%).Our fund-flows week wrapped up Wednesday, November 29, with the Russell 2000 (+0.61%) having a strong bounce back day. The remaining broad-based equity markets say low to negative daily returns—DJIA (+0.04%), S&P 500 (-0.09%), and Nasdaq (-0.16%). Treasury yields fell across the board for the third consecutive day, led once again by shorter end of the curve—two- (-2.27%) and three-year (-2.03%) Treasury yields. The dip in yields is signaling investor sentiment that the Federal Reserve may be done raising interest rates. Fed Governor Christopher Waller said that he is “increasingly confident” that monetary policy is in the right spot to slow the economy and bring inflation back to the central bank’s mandate of 2%. The Bureau of Economic Analysis (BEA) reported that the third quarter’s gross domestic product (GDP) increased at a 5.2% annualized rate, a revision upward from the previously reported 4.9% growth—marking the fastest expansion pace since Q4 2021.
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $2.5 billion in weekly net inflows, the ninth straight week when ETFs attracted new capital. The macro-group posted a 0.21% gain on the week, its fifth consecutive week in the black.Large-cap ETFs (+8.1 billion), equity income ETFs (+$466 million), and emerging markets equity ETFs (+$243 million) attracted the top inflows among the equity ETF subgroups. Large-cap ETFs reported their tenth straight weekly inflow, while suffering their first weekly loss in five weeks (-0.10%).Multi-cap ETFs (-$2.3 billion), small-cap ETFs (-2.3 billion), and sector equity ETFs (-2.1 billion) suffered the top weekly outflows under equity ETFs. Multi-cap ETFs reported its largest weekly outflow since week ending February 7, 2018.World sector equity ETFs (+2.25%) led the sub groups in weekly performance, with the largest attribution coming from Lipper Precious Metals Equity Funds.Over the past fund-flows week, the two top equity ETF flow attractors were SPDR S&P 500 ETF Trust (SPY, +$3.7 billion) and iShares MSCI USA Quality Factor ETF (QUAL, +$3.1 billion).Meanwhile, the bottom two equity ETFs in terms of weekly outflows were iShares MSCI USA Minimum Volatility Factor ETF (USMV, -$3.7 billion) and iShares Russell 2000 ETF (IWM, -$2.6 billion).
Exchange-Traded Fixed Income Funds
Exchange-traded taxable fixed income funds observed a $610 million weekly inflow—the macro-group’s eighth straight weekly inflow. Fixed income ETFs reported a return of positive 0.91% on average, their fifth consecutive positive weekly return.U.S. government & Treasury fixed income ETFs (+$1.1 billion), short/intermediate investment grade ETFs (+$519 million), and high yield ETFs (+$409 million) were the three top subgroups to see net inflows. Government & Treasury fixed income ETFs logged their fourth straight inflow as they have witnessed 11 in the last 12. The subgroup also has realized back to back weeks of gains.U.S. short/intermediate government & Treasury fixed income ETFs (-$1.8 million) was the only subgroup under taxable bond ETFs to observe outflows. After eight straight weeks of inflows, the subgroup has logged two four consecutive weekly outflows.Municipal bond ETFs reported a $513 million inflow over the week, marking their twelfth straight week attracting new capital. The subgroup realized a positive 0.97% return—the third week of gains in four.iShares 20+ Year Treasury Bond ETF (TLT, +$822 million) and Janus Henderson Mortgage-Backed Securities ETF (JMBS, +$420 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.On the other hand, SPDR Bloomberg 1-3 Month T-Bill ETF (BIL, -$1.0 billion) and iShares iBoxx $Investment Grade Corporate Bond ETF (LQD, -$752 million) suffered the largest weekly outflows under all taxable fixed income ETFs.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$5.3 billion) for the ninety-fourth straight week. Conventional equity funds posted a weekly return of positive 0.22%, the fifth consecutive week of gains.Large-cap funds (-$1.0 billion), multi-cap funds (-$951 million), and small-cap funds (-$726 million) were the top conventional equity fund subgroups to realize weekly outflows. Large-cap conventional equity funds observed their tenth straight weekly outflow while seeing their first weekly loss in five weeks.No subgroup under equity mutual funds recorded weekly inflows.
Conventional Fixed Income Funds
Conventional taxable-fixed income funds realized a weekly outflow of $1.5 billion—marking their twelfth consecutive weekly outflow. The macro-group logged a positive 0.95% on average—their fifth straight weekly gain.Short/intermediate investment-grade funds (-$855 million), general domestic taxable fixed income (-$145 million), and world income funds (-$133 million) suffered the top outflows among conventional taxable fixed income subgroups over the trailing week. Short/intermediate investment grade funds have seen 12 straight weekly outflows despite recording five consecutive weekly gains.No subgroup under taxable fixed income mutual funds recorded weekly inflows.Municipal bond conventional funds (ex-ETFs) returned a positive 1.11% over the fund-flows week, marking five straight weeks of plus-side returns. The subgroup experienced a $577 million outflow, marking the seventeenth straight weekly outflow.More By This Author:Private-Asset Binge Exposes Insurance To New Risks S&P 500 Earnings Dashboard 23Q3 – Friday, Dec. 1Russell 2000 Earnings Dashboard 23Q3 – Thursday, Nov. 30
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