U.S. Investors Continue to Favor Equity Funds

(Reuters) – U.S. investors have purchased equity funds for six consecutive weeks leading up to December 11, driven by expectations of a Federal Reserve interest rate cut during the upcoming meeting, amid signs of a moderating labor market and decreasing inflation.

During the week, investors acquired a net total of $6.36 billion in U.S. equity funds, following a previous week’s inflows of $8.82 billion, according to LSEG Lipper data.

Futures markets indicate a 96.7% chance that the U.S. Federal Reserve will reduce rates by a quarter-point at the Dec. 17-18 meeting to support a cooling labor market, with an unemployment rate around 4.2% in November.

U.S. large-cap and small-cap equity funds saw significant demand, attracting inflows of $2.33 billion and $2.12 billion, respectively. Multi-cap funds received $958 million in net purchases while mid-cap funds experienced outflows of $144 million.

Simultaneously, investors withdrew $1.22 billion from sectoral funds, marking the largest weekly outflow since September 25. The healthcare, consumer discretionary, and financial sectors saw liquidations of $898 million, $584 million, and $299 million, respectively.

In bonds, U.S. bond funds had net purchases of $4.15 billion for the week, extending a buying trend into the 28th consecutive week. Short-to-intermediate investment-grade funds garnered $2.95 billion, the largest inflow in three weeks. Also, domestic taxable fixed income and loan participation funds attracted inflows of $1.96 billion and $1.06 billion, respectively.

Conversely, money market funds faced minor net outflows of $2.67 billion after substantial purchases of $121.33 billion in the preceding week.