During Refinitiv Lipper’s fund-flows week ended July 27, 2022, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the third week in four, adding a net $6.1 billion.
Money market funds (+$6.0 billion), equity funds (+$372 million), and tax-exempt bond funds (+$237 million) logged weekly inflows, while taxable bond funds (-$537 million) suffered outflows. Money market funds have reported four straight weeks of inflows.
Index performance
At the close of Refinitiv Lipper’s fund-flows week, US broad-based equity indices traded positive for the fourth week in five—S&P 500 (+1.61%), Nasdaq (+1.13%), Russell 2000 (+1.12%), and DJIA (+1.01%).
The Bloomberg Municipal Bond Total Return Index (+0.65%) ended the week in plus-side territory for the sixth straight week. The Bloomberg U.S. Aggregate Bond Total Return Index appreciated 1.50%, marking its largest weekly gain in 120 weeks.
Overseas broad market indices traded mixed last week—FTSE 100 (+1.45%), Nikkei 225 (+0.72%), Shanghai Composite (-0.92%), and Dax 30 (-1.76%).
Rates/yields
The 10-two Treasury yield spread fell over the week to negative 0.24, marking the seventeenth straight trading session with an inverted yield curve.
As of Wednesday, July 27, investors will receive greater compensation for investing in the two-year Treasury note (2.97%) than the 10-year (2.73%).
According to Freddie Mac, the 30-year fixed-rate average (FRM) decreased for the first week in three, from 5.54% to 5.30%.
Looking at last week’s mortgage applications, the Mortgage Bankers Association (MBA) reported that applications declined for the fourth week in a row to the lowest level since February 2000.
Both the United States Dollar Index (DXY, -0.58 %) and the VIX (-2.49%) decreased slightly over the course of the week.
Markets
Our fund-flows week kicked off Thursday, July 21, with U.S. broad-based equity markets gaining for the third straight day—Nasdaq (+1.36%), S&P 500 (+0.99%), DJIA (+0.51%), and Russell 2000 (+0.48%).
Buying ensued in the Treasury markets causing yields to fall across the board by more than 3%.
The European Central Bank, which is responsible for monetary policy within the eurozone, raised interest rates for the first time in 11 years. The ECB lifted rates by a more-than-expected 50 basis points (bps).
Hoping to ease the price pains and global food shortage, the United Nations (UN) helped broker an agreement between Russia and Ukraine, allowing Ukraine to resume exporting wheat and corn.
US equity indices ended the calendar week on July 22 in the red. Reports from the S&P Global Flash Composite Purchasing Managers’ Output Index (PMI) showed a contraction in U.S. business activity, marking the first time in more than two years.
The National Association of Realtors (NAR) also reported that sales of previously owned homes fell 5.4% month-over-month in June to the fewest total since June 2020.
On Monday, July 25, markets were relatively quiet ahead of the Federal Reserve’s July meeting and GDP announcements.
Equity markets traded mixed—Russell 2000 (+0.60%), DJIA (+0.28%), S&P 500 (+0.13%), and Nasdaq (-0.43%). Treasury markets witnessed a selloff and saw yields rise slightly, led by the 30-year yield (+1.80%).
The Chicago Federal Reserve reported its National Activity Index (CFNAI), which is a monthly index that gauges overall economic activity and related inflationary pressures.
The June CFNAI came in at negative 0.19, which was unchanged from the previous month, continuing to signal below-average growth.
On Tuesday, July 26, the International Monetary Fund (IMF) lowered its global economic growth forecast for the remainder of the year, as well as next year.
The IMF now forecasts a 3.2% (vs. 3.6%) expansion in 2022 and a 2.9% (vs. 3.6%) expansion in 2023. The IMF predicted the US growth for the next two years to be 2.3% and 1%, respectively.
The world economic outlook also included updated estimates for inflation which were 6.6% for advanced economies and 9.5% for emerging and developed ones.
Tumbling equity markets
In the US, Walmart (WMT) shook up the markets as shares fell by nearly 8% on a profit warning, an indication that retail consumers are cutting back on spending while corporations deal with both food and fuel shortages.
Equity markets tumbled, led by Nasdaq (-1.87%) and S&P 500 (-1.15%).
Our fund-flows week wrapped up Wednesday, July 27, with the Federal Reserve acting as expected, increasing the fed funds rate by another 75 bps.
This marks the second straight month the central bank raised rates by at least three-quarters of a percent—it raised rates 100 bps last month for the first time since 1994.
The benchmark lending rate now stands at 2.25% to 2.50%, the highest upper limit since June 2019.
Powell continues to maintain a stance of necessary monetary tightening even if Fed actions continue to cause slower economic growth, a successful stance taken by former Fed Chair Paul Volcker in the early 1980s.
US equity markets reacted positively to the news—the Nasdaq (+4.06%) locked in its largest single-day gain in more than one year.
Jack Fischer is a senior research analyst at Refinitiv Lipper.
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