(Reuters) – Investors withdrew their money from global bond and equity funds in the week ending September 21, as caution crept in ahead of the U.S. Federal Reserve’s meeting at which rate hikes are expected to drive up inflation.
Data from the Refinitiv Lipper showed investors netted $7.32 billion from global bond funds, marking their biggest weekly net sale since August 31.
Graphic: Fund Flows: Global Equity Bonds and the Money Market https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrxorjpm/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg
The Federal Reserve raised its benchmark interest rate by 75 basis points on Wednesday, the third such hike in a row, and officials expect rates to reach 4.4% this year, 100 basis points higher than what the Fed forecast three months ago.
“Sooner or later bond yields will peak, although the timing is difficult to be exact,” said Bimal Patel, senior fund manager at Canada Live Asset Management. “The market is currently expecting the final US federal funds rate to be reached by March. and June 2023. .
Global short and medium-term bond funds saw their biggest weekly inflow in 11 weeks, netting $4.98 billion, while investors also exited $3.29 billion in higher-yield funds.
GRAPHIC: Global Bond Fund Flows for the Week Ending September 21 https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnkqgovq/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20Sept%2021.jpg
Meanwhile, global equity funds saw $1.86 billion selling in the fifth consecutive week of net selling.
Financial institutions and basic consumer goods lost $1.55 billion and $687 million, respectively, in outflows, but utilities and technology got $300 million in inflows.
“The value of energy, financial sector and materials remains attractive when compared to the rest of the US stock market,” said Eugene Barbanigra. “Valuation multiples for these companies remain low, and they will continue to benefit from an environment of high inflation and prolonged interest rates.” , portfolio manager at SEI.
Graphic: Fund Flows: Global Equity Sector Funds https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkrxkopx/Fund%20flows-%20Global%20equity%20sector%20funds.jpg
On the other hand, safer money market funds attracted investor interest with a net $28.23 billion, the largest weekly inflow since July 6.
Commodity funds data showed that precious metals funds remained unfavorable for the 13th week with net selling of $474 million. Investors also exited $60 million energy funds.
An analysis of 24,559 emerging market funds showed that investors sold $2.39 billion worth of equity funds, marking the 10th consecutive weekly outflow, while also exiting bond funds worth $2.78 billion.
Graphic: Money Flows: Stocks and Bonds in Emerging Markets https://fingfx.thomsonreuters.com/gfx/mkt/xmpjoazoqvr/Fund%20flows%20EM%20equities%20and%20bonds.jpg