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During Refinitiv Lipper’s fund-flows week ended April 6, 2022, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the first week in three, withdrawing a net $34.2 billion to the market.
Money market funds (-$26.4 billion), taxable bond funds (-$4.3 billion), tax-exempt bonds (-$3.3 billion), and equity funds (-$253 million) all suffered weekly outflows.
Index Performance
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices recorded their worst weekly performance in six weeks – Nasdaq (-3.83%), Russell 2000 (-3.55%), S&P 500 (-2.64%), and DJIA (-2.08%).
Fixed income indices struggled as well, both the Bloomberg U.S. Aggregate Bond Index (-1.31%) and Bloomberg Municipal Bond Index (-0.48%) realized their fifth consecutive negative weekly performance.
Overseas broad market indices traded negative – DAX 30 (-5.23%), Nikkei 225 (-3.78%), and FTSE 100 (-0.52%), with the lone bright spot coming from the Shanghai Composite (+0.34%).
Rates/Yields
The 10-two Treasury yield spread increased over the week (+256.67%) as the 10-year Treasury yield (+10.64%) outpaced the two-year (+7.47%).
As of March 31, the U.S. 30-year fixed-rate mortgage average rose to 4.67% – a 5.66% rise from the prior week and the fourth week in a row reporting an increase. Both the United States Dollar Index (DXY, +1.85%) and VIX (+6.38%) increased over the week.
Market Recap
Our fund-flows week kicked off Thursday, March 31, with broad-based equity markets reporting their second straight session in the red – S&P 500 (-1.57%), DJIA (-1.56%), Nasdaq (-1.54%), and Russell 2000 (-1.00%). The poor day in equity markets caps the first losing quarter since 2020. Oil prices fell slightly on the day, to right around $100 per barrel, as President Joe Biden announced the U.S. will release one million barrels of crude from the Strategic Petroleum Reserve per day for the next six months – the goal of this move is to help reduce prices at the pump. President Biden stated,
This is a moment of consequence and peril for the world, and pain at the pump for American families. Our prices are rising because of Russian President Vladimir Putin’s actions…There isn’t enough supply.”
On Friday, April 1, equity markets rebounded to start the new month – Russell 2000 (+1.01%) and DJIA (+0.40%) led the way. The Department of Labor reported a strong job creation during March, adding 431,000 jobs while marking the eleventh straight month of gains. The unemployment rate fell from 3.8% to 3.6% – the lowest rate since the start of the COVID-19 pandemic. As the labor market continues to strengthen, anticipation that the Federal Reserve will move forward with more aggressive rate hikes grows. The two-year Treasury yield increased 6.48% while the 10-year yield increased 2.15% on the day.
Monday, April 4, was another solid day for U.S. equity markets with the Russell 2000 (+1.01%) and DJIA (+0.30%) once again reporting strong plus-side performance. Oil futures moved above $100 per barrel as Russia launched attacks on Ukrainian crude facilities. The two-year Treasury yield ended the day at 2.43%, higher than the 10-year yield (2.41%), meaning an inverted yield curve. An inverted yield curve has been viewed as a forward-looking indicator of predicting a recession – each of the last eight recessions dating back to 1969 has been preceded by an inverted curve. In geopolitical news, the U.S. and EU are contemplating their next set of sanctions against Russia as Ukraine continues to accuse them of war crimes. Officials in Germany already have voiced their support to ban all Russian natural gas – a move that has been previously discussed but rejected.
Tuesday, April 5, was marked by comments out of the Federal Reserve. Vice-Chair nominee Lael Brainard said that policymakers must move at a “rapid pace” to reduce the central bank’s balance sheet, saying this move “is of paramount importance” to alleviate inflationary pressures. The 10-year yield ended the day jumping 5.89%. The VIX rose 11.09% as equity markets ended their two-day hot streak – Russell 2000 (-2.36%), Nasdaq (-2.26%), S&P 500 (-1.26%), and DJIA (-0.80%).
Our fund-flows week wrapped up Wednesday, April 6, with equity markets falling for the second straight day – tech-heavy Nasdaq (-2.22%) was the largest detractor. The latest Fed minutes were released showing “many” policymakers were in favor of increasing interest rates by 50 basis points (bps) but chose an increase of 25 bps due to the uncertainty of the geopolitical landscape. The Fed’s strong-willed planned approach to dealing with inflation is continuing to directly impact the housing market. Refinancing applications fell 10% from a week ago and have dropped 62% from last year. Applications for home purchases fell 3% week over week and are 9% lower than 12 months ago.
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded $2.6 billion in weekly net inflows, marking their ninth consecutive week of inflows. The macro-group posted a negative return of 2.60% on the week.
International equity ETFs (+$3.2 billion), growth/value large-cap ETFs (+$2.5 billion), equity income ETFs (+$1.6 billion), and global equity ETFs (+$468 million) were the largest equity ETF subgroups to post inflows this week. International equity ETFs have only suffered two weekly outflows over the past 16 weeks as the subgroup logs its third-largest weekly inflow of the year. Growth/value large-cap ETFs reported their ninth straight week of positive net flows despite realizing a negative 2.94% on average.
Sector-financial/banking ETFs (-$3.4 billion), sector-other ETFs (-$715 million), growth/value-small cap ETFs (-$666 million) and sector-energy ETFs (-$623 million) were the top flow detractors under the macro-group. Sector-financial/banking ETFs depreciated 4.48% over the week while observing their fifth weekly outflow in the last seven weeks.
Over the past fund-flows week, the top two equity ETF flow attractors were iShares: MSCI Emerging Markets ETF (EEM, +$1.6 billion) and iShares: Core S&P 500 ETF (IVV, +$1.6 billion).
Meanwhile, the bottom two equity ETFs in terms of weekly outflows were Select Sector: Financials Sector SPDR (XLF, -$2.8 billion) and SPDR S&P 500 ETF (SPY, -$2.3 billion).
Exchange-Traded Fixed Income Funds
Exchange-traded fixed income funds observed $2.5 billion in weekly net outflows – the macro-group’s first week of outflows in seven. Fixed income ETFs reported a weekly return of negative 0.94% on average – the macro-group’s fifth straight week of sub-zero performance.
Government-Treasury ETFs (-$1.6 billion), flexible funds ETFs (-$397 million), and government-mortgage ETFs (-$225 million) witnessed the largest outflows under the fixed income ETF macro-group. Government-Treasury ETFs witnessed their first weekly outflow in seven weeks as they have seen inflows in 10 of their past 12. This subgroup has suffered four consecutive weeks of sub-zero performance.
International & global debt ETFs (+$27 million) and balance funds ETFs (+$12 million) were the only attractors of capital under fixed income ETFs. International & global debt ETFs have logged weekly inflows in four of the last five weeks.
SPBR Blackstone Senior Loan ETF (SRLN, +$451 million), iShares: Core US Aggregate Bond ETF (AGG, +$307 million), and Wisdom Tree: Floating Rate Treasury ETF (USFR, +$295 million) attracted the largest amounts of weekly net new money for taxable fixed income ETFs.
On the other hand, JPMorgan: High Yield Research Enhanced ETF (JPHY, -$576 million), iShares: 7-10 Treasury Bond ETF (IEF, -$555 million), and iShares: TIPS Bond ETF (TIP, -$486 million) suffered the largest net weekly outflows.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$2.8 billion) for the eighth straight week. Conventional equity funds posted a weekly return of a negative 2.65%, marking their first week of negative performance in three weeks.
Growth/value small-cap funds (-$1.4 billion), growth/value large-cap funds (-$1.3 billion), equity income funds (-$297 million), global equity (-$239 million), and sector-technology funds (-$221 million) were the largest subgroup outflows under conventional equity funds. Growth/value small-cap funds have now recorded nine straight weeks of outflows and have realized their largest four-week moving average flow of the year (-$918 million). The subgroup also suffered a negative weekly performance of 3.76%.
International equity funds (+$621 million), growth/value-aggressive funds (+$146 million), sector-other funds (+$137 million), and sector-energy (+$78 million) were the largest attractors of capital over this fund-flows week. International equity funds have posted their first weekly intake in five weeks despite depreciating 2.35% on average.
Conventional Fixed Income Funds
Conventional fixed income funds realized a weekly outflow of $1.8 billion – marking their eleventh straight week of outflows. The subgroup has produced a negative four-week flow moving average of at least $1.3 billion in 10 consecutive weeks. The macro-group recorded a negative 0.96% on average – their third week of sub-zero performance in the last five.
Corporate-investment grade (-$1.6 billion), flexible funds (-$943 million), and government-mortgage (-$364 million) led the macro-group in outflows. Conventional corporate-investment grade funds have now suffered eight consecutive weeks of outflows while flexible funds have seen negative flows in five of the past six weeks.
Corporate-high yield funds (+$488 million), government-Treasury (+$468 million), and government-Treasury & mortgage funds (+$304 million) observed the largest intakes under fixed income conventional funds. Corporate-high yield funds celebrated their first weekly inflow in 12 weeks despite realizing negative performance (-0.45%) for the first week in three.
Municipal bond funds (ex-ETFs) returned a negative 0.08% over the fund-flows week – their fifth negative weekly performance in a row. The subgroup experienced $3.7 billion in outflows, marking their thirteenth week in a row of outflows and the largest outflows of the year. The subgroup has logged 10 straight weeks with a four-week moving outflow average of greater than $1.1 billion. 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.
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