If you were wondering, inflows to US equity funds continued in the lead-up to an election which seems quite likely to drag on, in one fashion or another, well past the “day after,” so to speak.
That’s not to say markets won’t be able to discern the likely identity of the next US president on Election Night or, more likely, early the next morning. But it is to say that one of the two candidates has a pathological (and maybe homicidal) aversion to losing. If that candidate isn’t declared the winner, expect weeks of challenges.
Undeterred, investors bought US equities over the week, but they sold stock funds on net globally. The outflow was small, at 1.4 billion.
The breakdown was $13.6 billion to ETFs and $15 billion from mutual funds. YTD, the cumulative inflow to equity-focused products globally stands at $520.19 billion.
Trivial though it was, the net redemption was notable for two reasons. First, outflows are a rarity in 2024. This was just the fifth net redemption of the year.
Second, it came “courtesy” of a third consecutive weekly outflow from EM shares, as illustrated below.
As the figure shows, emerging market-focused funds saw uninterrupted inflows since June, crescendoing in a record $41 billion haul early last month. Over the last three weeks, $17 billion of that haul hit the exits.
The chart text spoils the suspense: China-focused funds saw another $4 billion of outflows over the week. That’s on top of $6.7 billion the prior week and $4 billion the week before that.
Suffice to say some (many) investors are taking profits on the China stimulus rally. Nearly $15 billion of the mammoth $40 billion one-week buying spree witnessed at the beginning of October has now cashed out.
I’d say I’m not sure what that suggests about investors’ faith in Xi’s ability to turn things around across China’s struggling economy, but that wouldn’t be true: I know exactly what those outflows mean about the market’s view on China’s stimulus measures. Investors and traders were in Chinese equities for a quick buck (or a quick RMB) and now some of them are keen to take the money and run. Because who knows whether the Party can right the ship, and who knows what sort of tariffs, export restrictions and investment curbs China will grapple with after the US election.
Elsewhere on the flows front this past week, bonds saw nearly $18 billion of inflows and crypto funds took in $3 billion, the most in nearly eight months. Gold funds likewise saw inflows.
Money market funds, meanwhile, took in nearly $10 billion globally on EPFR’s data, but ICI’s figures showed a small, $2.2 billion outflow from US MMFs.
