March 24, 2017

U.S. Fund-Flows Weekly Report: Is the Trump Rally Over?

by Patrick Keon

Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) suffered their second straight week of net outflows as $9.8 billion left their coffers. For the two weeks combined the macro-groups experienced negative flows of over $24.8 billion. Money market funds (-$17.2 billion) and equity funds (-$1.0 billion) accounted for this past week’s net outflows, while taxable bond funds (+$8.3 billion) and municipal bond funds (+173 million) both took in net new money.

It was a rough week for the equity markets as investors grew impatient for the Donald Trump campaign-promised tax cuts and became fearful that the administration was about to get bogged down in the quagmire of healthcare legislation. For the fund-flows week ended Wednesday, March 22 the S&P 500 Index and the Dow Jones Industrial Average lost 1.54% and 1.38%, respectively. The Trump fears hit home on Tuesday, March 21; both the Dow (-237.85 points) and the S&P 500 (-29.45 points) suffered their worst one-day losses since prior to the election. Even with the week’s losses, both indices were still up just shy of 5% for the year to date (post-election, the Dow and S&P gained 12.7% and 9.8%, respectively), but the results of this week’s scheduled healthcare vote bear watching. There is some thought on the street that if healthcare doesn’t get taken care of now, it will push out the delivery of the all-important tax cuts and put the brakes on the Trump rally.

In a trend reversal equity mutual funds (+$843 million) took in net new money, while equity ETFs had net outflows of $1.9 billion. For mutual funds nondomestic equity funds (+$1.3 billion) accounted for all of the net inflows for the group, while domestic equity funds shed $436 million of assets. The largest individual net outflows on the ETF side belonged to SPDR S&P 500 (SPY, -$4.3 billion) and Financial Select Sector SPDR (XLF, -$961 million).

The positive flows for taxable bond funds were fairly evenly split between ETFs (+$4.8 billion) and mutual funds (+$3.5 billion). The largest net inflows for individual ETFs belonged to iShares iBoxx $ High Yield Corporate Bond (HYG, +$1.3 billion) and iShares iBoxx $ Investment Grade Corporate Bond (LQD, +$612 million). For mutual funds the Short/Intermediate Investment-Grade Debt Funds peer group attracted most of the net new money (+$2.7 billion), while the Loan Participation Funds category continued its winning ways (+$524 million).

Municipal bond mutual funds (+$55 million) experienced positive flows for the first week in four. The High Yield Muni Debt Funds peer group (+$223 million) accounted for all of the increase and was the only national muni debt category attracting net new money for the week.

Money market funds saw $17.2 billion net leave their coffers, with Institutional U.S. Government Money Market Funds (-$18.5 billion) accounting for the lion’s share of the outflows. The only money market peer groups recording net inflows for the week were Institutional U.S. Money Market Funds (+$2.6 billion) and Money Market Funds (+$1.4 billion).


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