Investors Reduce Holdings in U.S. Equity Funds

(Reuters) – Investors reduced holdings in U.S. equity funds for the fifth consecutive week through Sept. 25, driven by lingering concerns about the economy’s health and caution ahead of the U.S. presidential election.

Outflows from U.S. Equity Funds

According to LSEG data, investors divested a massive $22.43 billion worth of U.S. equity funds during the week, marking their largest weekly net sales since December 2022.

Weak U.S. consumer confidence heightened investor concerns about the health of the labor market, fueling worries that the Fed’s unusual 50 basis-point rate cut was a response to a significant economic slowdown.

By Segment

• U.S. large-cap equity funds experienced substantial outflows of $15.23 billion, the largest weekly net selling since December 2022.
• Investors withdrew a net $2.34 billion from small-cap funds, $2.08 billion from multi-cap, and $998 million from mid-cap funds.

Sectoral Funds

Among sectoral funds, investors withdrew $539 million from the consumer staples sector, reversing three consecutive weeks of net purchases. The real estate, industrials, and financials sectors each saw approximately $400 million in outflows during the week.

Bond Funds Amidst Outflows

Meanwhile, U.S. bond funds attracted $6 billion in net purchases, continuing a streak with their 17th consecutive weekly inflow.

Leading Inflows

Leading the pack, U.S. short-to-intermediate government and treasury funds recorded about $3.13 billion in inflows, the highest in four weeks. Additionally, U.S. general domestic taxable and short-to-intermediate investment-grade funds also saw significant net purchases, totaling $2.21 billion and $1.17 billion respectively.

Money Market Funds

U.S. investors acquired money market funds of a net $112.57 billion, marking their largest weekly net purchase since at least December 2020.