Global Investors Flock to Equity Funds on Expectations of U.S. Rate Cuts - Weekly Market Update
In a recent surge of market activity, global investors have poured into equity funds, driven by the anticipation of U.S. rate cuts following a slew of weaker economic indicators and dovish remarks from Federal Reserve Chair Jerome Powell. According to LSEG data, a net total of $15.41 billion was invested in global equity funds during the week, marking a significant increase from the prior week's $21.08 billion influx.
The recent downturn in U.S. economic reports, particularly in the manufacturing and services sectors, coupled with indications of easing labor market conditions, has sparked optimism about a potential Federal Reserve rate cut in September. Additionally, a softer reading on U.S. inflation and Powell's comments on the country's "disinflationary path" have further bolstered investor confidence in upcoming rate adjustments.
Notably, U.S. equity funds saw a substantial inflow of $8.62 billion, while European and Asian funds also attracted $3.81 billion and $2.34 billion, respectively. In terms of sectoral funds, technology emerged as a top performer with $810 million in inflows, followed by financials and communication services with $587 million and $201 million, respectively.
On the bond front, global bond funds experienced $12.18 billion in inflows, extending a streak of 28 consecutive weeks of net purchases. Corporate bond funds saw the largest weekly inflow since June 12 at $1.99 billion, while government bond funds secured a ninth consecutive weekly inflow of $1.98 billion.
In the commodities space, precious metal funds saw a surge in net purchases at a three-month high of $624 million, while energy funds faced outflows for the fourth straight week, totaling around $69 million. Emerging market funds showed mixed results, with equity funds receiving $288 million in net purchases for the second consecutive week, while bond funds witnessed outflows of $1.35 billion for the fourth consecutive week.
Overall, investors also allocated a significant $50.6 billion into money market funds, marking the highest inflow in four weeks. These market movements reflect the current sentiment and expectations in the financial landscape, signaling potential opportunities for investors to capitalize on shifting trends and make informed decisions for their portfolios.