Synopsis

US equity funds saw a fourth consecutive week of outflows as rising oil prices, inflation concerns and expectations of further Federal Reserve rate hikes weighed on investor sentiment. Investors withdrew $31.44 billion, led by large-cap funds, while sector funds attracted fresh money. Bond fund inflows also eased during the week.

US equity funds recorded net outflows for a fourth consecutive week in the period ended September 18, as rising crude oil prices intensified inflation concerns and expectations of further Federal Reserve rate hikes prompted investors to remain cautious, Reuters reported.

Investors withdrew $31.44 billion from US equity funds during the week, broadly in line with the $32 billion withdrawn in the previous week, according to LSEG Lipper data cited by Reuters.

Read more: Global Market Today: Asian stocks edge higher, oil extends losses

Crude oil prices climbed to four-month highs during the last week, raising concerns that higher energy costs could keep inflation elevated. The increase in oil prices also pushed US Treasury yields higher, creating additional pressure on growth-oriented investments.

The Federal Reserve raised its benchmark interest rate by 25 basis points on Wednesday, its first rate increase in more than three years, and indicated that additional tightening could be required as policymakers seek to contain inflationary pressures linked to higher energy costs. Reuters reported that markets were also assessing the possibility of another rate increase at the Fed's October meeting.

Read more: US Market: Fed rate path, oil prices and AI concerns to shape Wall Street this week

Large-cap funds bore the brunt of the weekly redemptions, with investors pulling $28.71 billion from the category. Mid-cap funds recorded outflows of $1.73 billion, while multi-cap funds saw withdrawals of $3.16 billion.

Small-cap funds bucked the broader trend, attracting $568 million during the week, according to LSEG Lipper data cited by Reuters.

Despite the broader withdrawals from US equity funds, sector-focused equity funds recorded $2.29 billion in weekly inflows, their strongest showing in seven weeks.

Financial-sector funds attracted $1.37 billion, while consumer discretionary funds received $795 million and technology funds drew $775 million.

The sector-level inflows suggest that investors continued to selectively allocate money to specific parts of the equity market even as broader fund flows remained negative.

Global bond funds recorded net inflows of just $554 million, the lowest level in five months. Investors continued to favor short-to-intermediate government and Treasury funds, which attracted $3.49 billion during the week, extending their inflow streak to an 11th consecutive week.

Municipal debt funds, however, recorded outflows of $1.81 billion, while short-to-intermediate investment-grade funds saw withdrawals of $817 million, according to Reuters.

Money market funds also experienced significant withdrawals, with investors pulling $58.87 billion, the largest weekly outflow from the category since July 15.

The latest fund-flow data highlights the growing tension between continued investor demand for selected equity sectors and broader caution over inflation, oil prices, Treasury yields and the Federal Reserve's tightening path.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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