Global Money Market Funds Attract Strong Inflows Ahead of U.S. Elections

(Reuters) – Global money market funds attracted sharp inflows in the week to Nov. 6 as investors sought safety ahead of the U.S. presidential election and the Federal Reserve's policy meeting.

Investors racked up a massive $127.44 billion worth of global money market funds during the week, marking their largest weekly net purchase since Jan. 3, according to LSEG data.

Donald Trump was elected U.S. president this week, with betting markets favouring him and polls suggesting a close contest.

On Thursday, the U.S. Federal Reserve cut interest rates by a quarter percentage point, with policymakers assessing potential complexities in the economic landscape as President-elect Trump prepares to take office next year.

The U.S. money market funds secured a significant $78.68 billion, the biggest amount in six weeks. Meanwhile, European and Asian funds saw inflows of $42.87 billion and $4.76 billion, respectively.

Additionally, investors acquired global equity funds worth $10.76 billion after net withdrawals of $2.95 billion in the previous week. They also invested $1.02 billion in industrial sector funds, the highest weekly net purchase since July 17. In contrast, the financials and consumer staples sectors experienced outflows of $420 million and $354 million, respectively.

Global bond funds attracted investments for the 46th consecutive week, totaling $11.45 billion.

Mark Haefele, chief investment officer at UBS Global Wealth Management, commented, "We continue to expect another 25 bps of Fed rate cut in December and a further 100 bps of easing in 2025. We recommend investors shift excess cash into quality fixed income, especially as the recent increase in yields offers an opportunity to lock in attractive levels."

Global short-term bond funds saw $3.23 billion in net purchases, the highest for a week since Sept. 25. Meanwhile, dollar-denominated medium-term, corporate, and government bond funds attracted inflows of $1.42 billion, $824 million, and $606 million respectively.

Among commodities, investors sold gold and other precious metal funds worth a net $649 million, ending a 12-week buying trend. The energy sector also faced outflows of $245 million.

Data covering 29,675 emerging market funds indicated that bond funds had $1.55 billion in outflows, marking the third consecutive week of net selling. Equity funds were similarly out of favor, with $518 million in sales.