What’s going on here?
Investors are flocking to money market funds, seeking safety amid growing recession fears, prompting a $14.24 billion influx globally last week.
What does this mean?
Disappointing US jobs and manufacturing data have spurred concerns about a potential recession, pushing investors toward safer havens like money market and government bond funds. According to LSEG, money market funds saw a net inflow of $14.24 billion in the week leading to August 14, following an even heftier $97 billion the prior week. Government bond funds also benefited, attracting $2.6 billion, marking the 15th consecutive week of net inflows. This shift comes despite positive US inflation data and strong retail sales, which helped equities stabilize. Riskier equity funds showed resilience, reversing a prior net outflow of $4.56 billion with an influx of approximately $857 million.
Why should I care?
For markets: A cautious recalibration.
While global money market funds are attracting cash, certain equity sectors are showing signs of recovery. US funds, however, faced a net outflow of $8.92 billion. Meanwhile, European funds saw a notable comeback with $6.57 billion in net purchases after enduring two weeks of outflows. Similarly, Asian funds drew a net $2.09 billion. Investors are cautiously readjusting, pouring a net $938 million into technology and $850 million into utilities, though consumer discretionary funds saw withdrawals of $426 million.
The bigger picture: Global shifts in investment sentiment.
Bond markets remain a strong draw, with global bond funds securing $4.04 billion in net inflows for the 34th consecutive week. Sterling-denominated global bond funds hit their highest inflows since November 2020, attracting $2.34 billion. However, not all sectors are benefiting: corporate bond funds and loan participation funds experienced outflows of $3.85 billion and $653 million, respectively. Energy funds also dipped, seeing a net outflow of $193 million after five weeks of gains. Meanwhile, precious metal funds flipped from net selling to a $645 million net purchase, indicating a shift in strategy amidst economic uncertainties.
