US equity funds see first weekly outflow in six weeks

U.S. equity funds witnessed their first weekly outflow in six weeks in the week through November 26, as concerns over lofty tech valuations prompted investors to take profits and overshadowed optimism about a possible Federal Reserve rate cut next month.

They divested a net $4.56 billion worth of U.S. equity funds in their first weekly net sales since October 15, LSEG Lipper data showed.

The S&P 500 has risen more than 3% so far this week on expectations of a Federal Reserve rate cut next month. But investors remain cautious as November has been marked by heightened volatility, driven by concerns over stretched tech valuations and the economic impact of a record 43-day U.S. government shutdown.

U.S. large-cap funds saw a net $144 million weekly outflow following five successive weeks of inflows. Investors also ditched mid-cap and small-cap funds worth a total of $1.69 billion and $885 million, respectively.

U.S. bond funds remained popular for an eighth straight week as these funds drew approximately $8.6 billion in weekly inflows.

Short-to-intermediate government and treasury funds secured $4.05 billion, the largest amount for a week since September 24. General domestic taxable fixed income funds also had a net $1.59 billion weekly inflow.

U.S. money market funds, meanwhile, received $25.28 billion worth of inflows after two successive weeks of net sales.

Global equity funds saw their first weekly outflow in 10 weeks in the week to November 26, as concerns about stretched valuations, particularly in the tech sector, outweighed optimism around expected U.S. interest rate cuts next month.

According to LSEG Lipper data, investors withdrew a net $4.48 billion from global equity funds as they registered their first weekly net sales since September 17.

In the most recent week, investors divested U.S. and European equity funds of $4.56 billion and $1.21 billion, respectively, but invested approximately $170.37 million in Asian equity funds.

Overall, global equities had a volatile November, with fears over stretched tech valuations and a record 43-day U.S. government shutdown weighing on sentiment.

“We continue to view AI as a market driver, but the sector will likely be assessed more selectively, and high valuations of many AI leaders carry disappointment risk,” said Vincenzo Vedda, chief investment officer at asset management firm DWS Group.

“For this reason, we remain broadly diversified and see gold as a relative hedge.”

Inflows in global bond funds, meanwhile, cooled to a 22-week low of $6.77 billion during the week.

Euro-denominated bond funds faced a net $3.58 billion outflow, the first weekly net sales since July 9. Short-term bond funds, however, gained $5.56 billion in a fourth successive week of net purchases.

Investors added $2.54 billion worth of money market funds as they ended a two-week selling trend.

Gold and precious metals commodity funds, meanwhile, stayed popular for a seventh straight week as these funds drew roughly $1.66 billion in weekly inflows.

In emerging markets, investors snapped up $3.34 billion worth of equity funds, the most since July 9. They also added a marginal $5.98 million worth of bond funds, data for a combined 28,793 funds showed.