What’s going on here?

Global equity funds recorded outflows of $4.9 billion – the first negative streak in five weeks – amid rising US Treasury yields and cautious sentiment ahead of a crucial US report, according to Lipper data.

What does this mean?

The ongoing rise in US Treasury yields, driven by better-than-expected confidence data for May and a positive labor market outlook, has prompted investors to retreat from global equities. US equity funds experienced substantial outflows totaling $7.6 billion, while Asian equity funds recorded their second consecutive weekly outflow of $1.5 billion. Interestingly, European equity funds bucked the trend, attracting inflows of $3.7 billion. Reflecting the overall cautious sentiment, the MSCI All Country Index dropped nearly 2% as investors anxiously await the US core personal consumption expenditures price index (PCE) report for April.

Why should I care?

For markets: Sector tug-of-war.

Sector-specific funds saw a mixed bag, with significant outflows in financials ($598 million), health care ($570 million), and consumer discretionary ($452 million). Conversely, technology funds attracted $379 million, and industrial sector funds saw inflows of $289 million. This sector tug-of-war highlights the volatile and uncertain market landscape investors are navigating.

The bigger picture: Shifting sands in investment preferences.

Global funds reflected a shift in investor preferences, garnering $4.3 billion in inflows – albeit a significant drop from the previous week’s $12.4 billion. Within this segment, global government bond funds pulled in $877 million, high-yield bond funds secured $337 million, and loan participation funds accumulated $394 million. Meanwhile, money market funds flipped to outflows of $5.7 billion, a stark contrast to the $17.1 billion inflow the previous week. Commodities mirrored the exit trend, with precious metals and energy funds encountering outflows of $580.4 million and $80 million, respectively. Emerging market funds also felt the heat, marking their largest equity outflow in over a month with $538.1 million, and bond outflows of $952 million – their first in three weeks.

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