During Refinitiv Lipper’s fund-flows week ended March 30, 2022, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the second straight week, adding a net $31.5 billion to the market.
Money market funds (+$29.8 billion) and equity funds (+$3.8 billion) attracted new capital, while taxable bond funds (-$117 million) and tax-exempt bonds (-$2.0 billion) suffered weekly outflows.
Index performance
At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based equity indices recorded positive weekly performance—Nasdaq (+3.73%), S&P 500 (+3.28%), DJIA (+2.53%), and Russell 2000 (+1.89%).
Fixed income indices struggled once again, both the Bloomberg U.S. Aggregate Bond Index (-0.18%) and Bloomberg Municipal Bond Index (-0.85%) realized their fourth consecutive negative weekly performance.
For the most part, overseas broad market indices traded positive—the DAX 30 (+3.77%), FTSE 100 (+1.29%), Shanghai Composite (+0.19%), and Nikkei 225 (-0.84%).
Rates and yields
A flat yield curve has become inverted. The three-year Treasury yield (2.50%) has topped the 30-year Treasury yield (2.48%). The 10-two Treasury yield spread fell significantly on the week (-85.58%) to 0.03.
As of March 24, the U.S. 30-year fixed-rate mortgage average rose to 4.42%—a 6.25% increase from the prior week. Both the United States Dollar Index (DXY, -0.84%) and VIX (-21.93%) decreased over the week.
Market recap
Our fund-flows week kicked off Thursday, March 24, with the Department of Labor (DOL) reporting jobless claims for the week fell to their lowest totals since 1969.
U.S. equity markets bounced back from Wednesday’s losses, led by the tech-heavy Nasdaq (+1.93%).
Also helping growth issues was Congress’ $52 billion CHIPS Act, which would help support building U.S.-based semiconductor foundries.
On the geopolitical front, the U.S. and its allies have expanded sanctions to members of the Russian parliament as well as the CEO of the country’s largest bank. The U.S. also signaled gold-related transactions may be next.
On Friday, March 25, U.S. broad-based equity markets ended the day in the black, this time led by the S&P 500 (+0.51%).
Shorter-dated Treasury yields spiked—the two- and three-year Treasury yields rose by more than 8%—as Bank of America is now predicting two 0.50% hikes in the coming June and July Federal Reserve meetings.
Real estate
The pain is being immediately felt in the real estate market. The National Association of Realtors (NAR) reported that pending home sales have fallen 4.1% from January and are down 5.4% from last year.
NAR chief economist Lawrence Yun said that home buyers are having to deal with a 28% rise in mortgage payments from last year.
Monday, March 28, marked the first time since 2006 that the five-year Treasury yield exceeded the yield on the 30-year.
The 10-two Treasury yield spread fell 30.41% on the day. Equity markets finished the day positive—Nasdaq (+1.31%), S&P 500 (+0.71%), and DJIA (+0.27%). Oil futures dropped more than 9% to $103 per barrel.
On Tuesday, March 29, equity markets extended their streak to four straight sessions—Russell 2000 (+2.65%), Nasdaq (+1.84%), S&P 500 (+1.23%), and DJIA (+0.97%).
The 10-year Treasury yield fell 3.11% as the 10-two spread fell another 63.70%, its largest daily fall in more than a year.
The Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS) reported that employee quits increased by 94,000 to 4.35 million—the third-largest total on record.
Our fund-flows week wrapped up Wednesday, March 30, with U.S. broad-based equity markets ending their four-day hot streak—Russell 2000 (-1.94%) and Nasdaq (-1.21%) were the largest detractors on the day.
ADP reported the private sector added 455,000 jobs in March, led by 161,000 in leisure and hospitality.
News from the White House suggests a plan to release around 180 million barrels of oil from reserves is imminent.
This would be the largest release since the stockpile was created in 1975. According to AAA, the national average for a gallon of gas is $4.23, but states like Illinois and California are closer to $6 than they are to $4.
ETF equity funds
Exchange-traded equity funds recorded $7.7 billion in weekly net inflows, marking their eighth consecutive week of inflows. The macro-group posted their largest four-week flow moving average of the year while realizing a positive 2.69% on the week.
Growth/value large-cap ETFs (+$4.9 billion), international equity ETFs (+$2.7 billion), and equity income ETFs (+$1.2 billion) were the largest equity ETF subgroups to post inflows this week.
Growth/value large-cap ETFs reported their eighth straight week of positive net flows as they logged a positive 3.53% on average. International equity ETFs have only suffered two weekly outflows over the past 15 weeks.
Sector-energy ETFs (-$1.3 billion), growth/value-small cap ETFs (-$642 million), global equity ETFs (-$442 million), and sector-real estate ETFs (-$393 million) were the top flow detractors under the macro-group.
Geopolitical uncertainty and Russian sanctions have caused a large gap in imports of barrels of oil per day.
Even with the U.S. planning to release more than one million from reserves, we may still be short another three to four million barrels per day from pre-invasion levels. Sector-energy ETFs logged their second-largest outflows on record.
See more from Jack Fischer – Rising rates environment weighs down growth