U.S. Equity Funds See Significant Outflows Amid Economic and Earnings Concerns

U.S. equity funds experienced major outflows as retail sales and Fed resistance dampened rate cut expectations, with investors selling a net total of $9.23 billion worth of funds.

U.S. equity funds experienced significant outflows in the week ending on Jan. 17, as a strong retail sales report and resistance from Federal Reserve officials dampened expectations for a policy rate cut in March. Investor sentiment was further weighed down by disappointing fourth-quarter earnings from major U.S. lenders, including Morgan Stanley. According to LSEG data, U.S. investors sold a net total of $9.23 billion worth of equity funds during the week, following a net disposal of $11.5 billion in the previous week.

Breaking down the outflows by segment, U.S. multi-cap funds saw the largest withdrawals, with investors pulling out a net total of $4.26 billion. Large-, mid-, and small-cap funds also experienced net selling of $1.84 billion, $1.63 billion, and $418 million, respectively. In terms of sector funds, investors sold off consumer discretionary, consumer staples, and healthcare funds, amounting to $280 million, $232 million, and $153 million, respectively. However, the tech sector bucked the trend, receiving approximately $371 million in inflows.

On the other hand, U.S. bond funds continued to attract investor interest for the fourth consecutive week, with a net total of $6.56 million flowing into these funds. Specifically, U.S. general domestic taxable fixed income funds received around $3.28 billion during the week, following net purchases of $5.22 billion in the previous week. Additionally, investors purchased high yield and municipal debt funds, amounting to approximately $1.08 billion and $897 million, respectively. In contrast, U.S. money market funds experienced a net outflow of $22.83 billion, marking the first weekly outflow in four weeks.

The U.S. equity market experienced significant outflows in the face of a strong retail sales report, resistance from Federal Reserve officials, and disappointing fourth-quarter earnings from major U.S. lenders. On the other hand, U.S. bond funds continued to attract investor interest, while money market funds saw a net outflow for the first time in four weeks.