U.S. investors are adjusting their portfolios, moving away from equities to money market funds as caution prevails before key payroll reports. In the largest weekly net buying spree since November 29, approximately $56.92 billion flowed into U.S. money market funds, contrasting with an exit of about $5.54 billion from equity funds, according to data from LSEG.
The U.S. unemployment data on Thursday, signaling a resilient labour market, tempered expectations of aggressive rate cuts by the Federal Reserve in 2024. As monthly U.S. payrolls figures loomed, investors sought further evidence, prompting a shift in holdings.
Despite a nine-week consecutive gain, the S&P 500 dipped 1.7% in the first week of 2024, raising concerns about premature expectations for significant rate cuts.
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Investors showed a preference for small-cap funds, attracting $1.32 billion in the fifth straight week of net buying. However, large-, mid-, and multi-cap funds saw outflows of $687 million, $1.37 billion, and $652 million, respectively. In the sector funds arena, the tech sector led outflows with $879 million in net selling, followed by industrials and real estate sectors with outflows of $361 million and $214 million, respectively.
Conversely, U.S. bond funds experienced a turnaround with $4.44 billion in purchases, marking the first weekly inflow in six weeks. Notably, U.S. short/intermediate government & treasury funds received a substantial sum of $3.25 billion, ending an eight-week selling streak. Short/intermediate investment-grade and general domestic taxable fixed income funds also witnessed positive flows of about $1.75 billion and $614 million, respectively.
