Global Equity Funds See Strong Inflows Amid Rate Cut Expectations

Discover the latest trends in global equity funds and US equity funds as investors anticipate rate cuts. Explore the impact of rate cut hopes on fund inflows and stay ahead of the market.

Global equity funds experienced a surge in inflows during the week ending Dec. 27, driven by U.S. inflation data indicating a further cooling in November. This has solidified expectations of a Federal Reserve interest rate cut in March next year. The MSCI All-World index reached 3184.32 on Thursday, its highest level since January 13, 2022, reflecting market optimism over the prospects of rate cuts.

According to LSEG data, global equity funds received a net $16.01 billion during the week, marking their most significant weekly net purchase since March 22. U.S. equity funds attracted the largest amount of inflows, with investors pouring about $14.57 billion, the highest since June 14. However, European and Asian funds faced outflows of roughly $1 billion and $182 million, respectively. Global bond funds, on the other hand, received $1.07 billion in inflows after two successive weeks of outflows. Investors purchased $2.62 billion worth of global corporate bond funds, in contrast to disposals of about $3.9 billion in the prior week. High yield funds also secured inflows, worth about $679 million, but government bond funds had outflows of $265 million. Meanwhile, global money market funds attracted $9.12 billion, their first weekly inflow in three weeks. In the commodities segment, precious metal funds attracted about $111 million in inflows, extending into a fourth successive week. Energy funds also saw about $36 million in net buying. Data covering 29,066 emerging markets funds showed equity funds securing $1.94 billion worth of inflows, breaking a 19-week-long selling streak. However, EM bond funds had $1.33 billion worth of outflows. U.S. equity funds attracted massive inflows in the week up to Dec. 27, bolstered by expectations of early rate cuts by the Federal Reserve as data showed that inflation cooled further in November.

According to LSEG data, investors purchased a net $14.57 billion worth of U.S. equity funds during the week, marking their biggest weekly net purchase since June 14. The U.S. personal consumption data last Friday showed that U.S. prices fell in November for the first time in more than 3-1/2 years, pushing the annual increase in inflation further below 3%. U.S. large-, small-, and multi-cap funds attracted $8.93 billion, $3.63 billion, and $642 million, respectively, however, mid-cap funds witnessed outflows of $665 million. Meanwhile, U.S. sectoral equity funds had outflows of about $1.19 billion, with consumer staples and healthcare witnessing $924 million and $721 million worth of net selling, respectively. Bond funds, meanwhile, received a marginal $8 million worth of inflows after four successive weeks of outflows. U.S. general domestic taxable fixed income funds and short/intermediate investment-grade funds saw net purchases of $1.83 billion and $210 million, respectively. Short/intermediate government & treasury funds, however, suffered outflows of about $1.92 billion. The LSEG data also showed that U.S. investors purchased about $9.68 billion worth of money market funds after two weeks of net selling in a row.