Investors were expecting quarter-point interest rate hikes from the US Federal Reserve and European Central Bank (ECB) in early May. They got them, along with the collapse of another American regional bank, a warning from Treasury Secretary Janet Yellen that the US may not be able to pay its bills in June if the debt ceiling standoff persists and more violent protests against pension reform in France.
Flows to and from EPFR-tracked fund groups during the final week of March continued to paint a picture of risk aversion and fear among investors. For the third week running liquidity funds recorded above average inflows while High Yield, Bank Loan, Emerging Markets Bond and Alternative Funds extended their current outflow streaks.
The second week of March was dominated by the crumbling fortunes of large US regional banks and European major Credit Suisse. Although this certainly dented investors’ risk appetite, many saw events as an opportunity – especially if major central banks dust off their playbooks from 2008-09 and 2020, opening lines of credit and secured lending facilities and cutting interest rates.
The third month of 2023 started with investors pulling another $5 billion out of EPFR-tracked US Equity Funds, extending that group’s longest outflow streak since 2Q20, as stronger-than-expected consumer spending and a resilient labor market undermined the case for an early end to the current US rate hiking cycle.
One year after the start of Russia’s war in Ukraine, we look at investor sentiment using fund flows and allocations data to analyze key market trends.
Actions spoke louder – to equity investors – than words coming into February, with the fact that the latest interest rate hike by the US Federal Reserve was only 25 basis points, boosting flows to US Equity Funds and other groups despite the accompanying verbal warning that the battle against inflation is “not fully done.”
At the turn of the century, investing in China was viewed as a risky proposition. Foreign access to a notoriously volatile, retail-driven equity market was heavily restricted. The lack of a credible regulatory framework and legal protections deterred US venture capitalists from making direct investments in Chinese companies. In many cases, Chinese banks and the country’s fledgling private equity industry also balked. So, when Chinese technology firm Alibaba received its first $25 million investment from Goldman Sachs in 1999, investors sat up and took notice.
In this special edition, Kirsten is joined by EPFR’s CEO Todd Willits, who will comment on the company’s recent rebrand and what this exciting change entails for the firm and its customers in the months to come.
Flows into EPFR-tracked Emerging Markets Equity Funds during the third week of January climbed to their highest level since mid-1Q21 as investors positioned themselves for China’s much anticipated economic rebound and, the anti-inflation rhetoric of the Federal Reserve and European Central Bank (ECB) notwithstanding, an early end to the current interest rate cycles in the US and Europe. Investors also steered $2.5 billion – a 101-week high – into Emerging Markets Bond Funds.
Evidence that inflation is falling and global growth is stalling gave EPFR-tracked Bond Funds a shot in the arm during the first full week of January. Ahead of December’s CPI number, which showed US inflation grew at a 13-month low of 6.45% in the final month of 2022, investors committed over $17 billion to all Bond Funds.