The Dow Jones Industrial Average scaled an intraday record high on Friday, playing catch-up with two other main U.S. indexes in recent broad-based market gains.
The blue-chip 30-stock index was up 0.9% at 40,094.54 points, surpassing its previous intraday all-time high of 40,077.40 points hit in late May.
So far this year, the Dow has risen 6.4%, underperforming the broader S&P 500 and the tech-heavy Nasdaq Composite, which have advanced 18.2% and 23.1%, respectively, over the same period.
Growth stocks, powered by technology and semiconductors, have led the market higher in 2024, while the more value-oriented Dow has struggled to keep up.
Global debt funds attracted inflows for a 29th straight week in the seven days to July 10 on expectations of a Federal Reserve rate cut amid weakening labour market conditions and easing inflation levels.
According to LSEG data, global bond funds drew a net $9.75 billion worth of inflows during the week after about $12.28 billion worth of net purchase in the prior week.
A closely watched U.S. labor market report last week indicated that the unemployment rate rose to a 2-1/2 year high of 4.1% in June, heightening market expectations of a Federal Reserve interest rate cut.
This expectation was further supported by an inflation report this week, which showed U.S. consumer prices fell by 0.1% in June, reinforcing a disinflationary trend. Consequently, the benchmark 10-year Treasury yields dropped to a four-month low of 4.168% on Thursday.
By region, U.S. bond funds led the way, securing about $3.77 billion in a sixth consecutive week of net buying. European and Asian funds, meanwhile, attracted about $3.22 billion and $1.53 billion, respectively.
Investors bought $1.97 billion worth of government bond funds, logging net inflows for a 11th week. Corporate, and loan participation funds received $1.09 billion and $448 million, respectively in net purchases.
Global equity funds experienced a third successive week of inflows, although at just $114 million, compared with $16.45 billion worth of net purchases in the prior week.
Investors ditched a notable $1.18 billion and $354 million worth of healthcare and financial sector funds, while the tech sector still drew approximately $1.22 billion, a fifth weekly inflow in a row.
Simultaneously, investors parked a net $34.16 billion in global money market funds, posting a second weekly inflow in a row.
In the commodities segment, precious metals funds saw first weekly outflow in three, valuing $155.9 million on a net basis. Conversely, investors poured $106.8 million in energy funds, snapping a four-week selling streak.
Data covering 29,498 emerging market funds showed that bond funds gained a significant $1.58 billion in inflows, the largest amount in five weeks. Equity funds, meanwhile, saw outflows easing to a four-week low of $247 million. While investors are still scrambling to get on board the shiniest new mega-trends and what seems like a runaway stock market, a slower-moving juggernaut from the past could well cut across the equity fast lane.
One of the biggest supercycles of all - the course of nearly $40 trillion of U.S. retirement savings and its glacial shifts - is creeping back on the radar for some long-term strategists just as indiscriminate, passive stock index plays looks to many like the only vehicle in town.
A bias to passive equity due to the multi-decade shift from “defined benefit” (DB) pensions, where employers or government take the risk in guaranteeing stable salary-linked income after retirement, to “defined contribution” (DC), where the onus is on workers to save and ensure their own retirement income, may now be fading.
That’s no bolt from the blue - but it’s a flag for savers hogging record-high stock index holdings and considering the years ahead.
To be sure, talk of headwinds to U.S. and global equity indexes that have loaded another 20% to 30% of gains over the past year is hardly a popular take right now.
Mid-year updates from global asset managers suggest the artificial intelligence boom may only be in its infancy, green investment opportunities are building, economic and earnings growth is still humming and all against a backdrop of falling interest rates.
Active managers parse the hotspots and laggards of course. Ever-patient “value managers” still pray for some rotation to better-priced smaller stocks, sectors or countries.
But for most savers, relatively cheap equity index trackers - even though flattered by big tech megacaps adding twice those index gains over the past 12 months and single-stock treblings of AI plays like Nvidia - have proven to be low-hanging fruit.
And while handwringing over the influence of handful of megacaps abounds, that equity performance is only partly explained by such concentration - at least in the United States.
The equal-weighted S&P 500 that adjusts for the influence of outsize stock leaders has indeed lagged the main index over the past 10 years - but it has still doubled over the decade and beaten global benchmarks to boot.
Comments