Investors withdrew from global bond and equity funds in the week ending Sept. 21, with caution ahead of the US Federal Reserve meeting, where further rate hikes were expected to tame rising inflation.
Investors left a net $7.32 billion in global bond funds, marking their biggest weekly net sale since Aug. 31, data from Refinitiv Lipper showed.
CHART: Fund Flows: Global Equities, Bonds and Money Market https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrxorjpm/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg
The Federal Reserve raised its benchmark rate by 75 basis points on Wednesday, its third rise in a row, and officials predict that interest rates will reach 4.4 percent this year, which was 100 basis points higher than what the Fed forecast three months ago.
“Sooner or later, bond yields will peak, although the timing of this is difficult. The market currently expects the terminal US fed funds rate to be reached around March-June 2023,” said Bimal Patel, senior fund manager at Canada Life Asset Management. .
Global short- and medium-term bond funds saw their largest weekly outflow in 11 weeks, netting $4.98 billion, while investors also exited a net $3.29 billion in high-yield funds.
CHART: Global bond fund flows in the week ended September 21 https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnkqgovq/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20Sept%2021.jpg
Meanwhile, global equity funds witnessed sales worth $1.86 billion in a fifth straight week of net sales.
Financial services and consumer staples lost $1.55 billion and $687 million in outflows, respectively, but utilities and technology both gained about $300 million in inflows.
“Energy, finance and materials are still attractively valued relative to the rest of the US stock market. The valuation multiples of these companies remain low and they continue to benefit from ongoing inflation and rising interest rates,” said Eugene Barbaneagra, portfolio manager at SEI.
CHART: Fund Flows: Global Equity Sector Funds https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkrxkopx/Fund%20flows-%20Global%20equity%20sector%20funds.jpg
On the other hand, safer money market funds captured investor interest as they netted $28.23 billion, the largest weekly inflow since July 6.
Data for commodities funds showed precious metals funds fell out of favor for a 13th week with a net divestment of $474 million. Investors also abandoned $60 million in energy funds.
An analysis of 24,559 emerging market funds showed that investors sold $2.39 billion in equity funds, a tenth consecutive weekly outflow, while also exiting $2.78 billion in bond funds.
CHART: Fund Flows: Emerging Market Stocks and Bonds https://fingfx.thomsonreuters.com/gfx/mkt/xmpjoazoqvr/Fund%20flows-%20EM%20equities%20and%20bonds.jpg