by Patrick Keon.
Thomson Reuters Lipper’s fund asset groups (including both mutual funds and ETFs) had net inflows of $403 million for the fund-flows week ended Wednesday, August 1. Equity funds (+$2.1 billion) accounted for the lion’s share of the net-positive flows, while money market funds contributed $344 million to the total. Fixed income funds did not fare as well; both taxable bond funds (-$1.6 billion) and municipal bond funds (-$368 million) both saw net money leave their coffers.
Both the S&P 500 Index (-1.15%) and the Dow Jones Industrial Average (-0.32%) retreated for the fund-flows trading week. There was a plethora of economic news for investors to digest during the week, including (1) influential quarterly earnings releases from several of the FAANG stocks, (2) gross domestic product growth of 4.1% for Q2 2018, and (3) the Federal Reserve leaving interest rates unchanged at its mid-week policy meeting. The most impactful of the tech company earnings announcements came from Facebook. It reported lower-than-anticipated quarterly sales and offered weak guidance, which resulted in the largest one-day loss of market value ($120 billion) in the history of the stock market as Facebook’s stock price fell 19%. After this record-setting loss positive results from Amazon.com and Apple helped stem some of the negative tide. Amazon.com posted earnings that were twice what were expected and represented the firm’s largest quarterly profit ever. Meanwhile, Apple reported for Q2 (typically a weak quarter for the firm) its highest revenue ever. GDP—the main driver of the level of the stock market—came in at 4.1% for Q2—the fastest rate of growth in roughly four years. The Fed left the federal funds rate unchanged at 1.75% to 2.00% at its latest meeting as expected. It also indicated the market should expect another rate hike during the Fed’s September meeting, putting the Fed on track to meet expectations of two more increases (September and December) during 2018.
ETFs had net inflows (+$5.6 billion) for the fourth straight week. Equity ETFs (+$5.9 billion) were responsible for all the net-positive flows, while taxable bond ETFs (-$239 million) and municipal bond ETFs (-$116 million) both experienced net outflows. The two largest net inflows for equity ETFs belonged to SPDR S&P 500 ETF (SPY, +$4.6 billion) and SPDR S&P Dividend (SDY, +$1.1 billion). The largest net outflows for the taxable bond group were attributable to iShares TIPS Bond ETF (TIP, -$379 million), while iShares National Muni Bond (MUB, -$86 million) had the largest net outflows for the muni bond peer group.
Equity Mutual Funds
Equity mutual funds (-$3.8 billion) suffered their sixth straight week of net outflows. Both domestic equity funds (-$3.1 billion) and nondomestic equity funds (-$700 million) contributed to the total net outflows. The Large-Cap Growth Funds (-$886 million) peer group had the largest net outflows among domestic equity funds, while Emerging Market Funds (-$231 million) led the nondomestic equity fund groups.
Fixed Income Mutual Funds
The taxable bond (-$1.4 billion) and muni debt (-$253 million) fund groups both suffered net-negative flows for the week. In the taxable bond fund space it was “risk off” as investors shied away from riskier asset groups such as High Yield Funds (-$356 million) and Emerging Market Debt Funds (-$220 million). The most significant net outflows in the muni bond fund universe came from the Short/Intermediate Muni Debt Funds (-$68 million) and High Yield Muni Debt Funds (-$66 million) peer groups.
Money Market Mutual Funds
Money market funds took in $344 million of net new money for the week. The largest net inflows were attributable to the Money Market Instrument Funds (+$3.6 billion) and Institutional Money Market Funds (+$2.4 billion) peer groups, while U.S. Government Money Market Funds (-$2.3 billion) saw the most money leave.