U.S. Investors Shift from Equity to Money Market Funds

(Reuters) – In the week leading up to January 8, U.S. investors transitioned from equity funds to the safety of money market funds due to uncertainties surrounding the Fed’s interest rate policies and impending tariffs from the incoming Trump administration.

Investors withdrew a net $5.05 billion from U.S. equity funds, while they invested a substantial $56.19 billion into money market funds, marking the largest net purchase since December 4, 2024, according to LSEG Lipper data.

The minutes from the U.S. Federal Reserve’s December 17-18 meeting, released Wednesday, highlighted growing concerns among officials regarding ongoing price pressures and the potential implications of the new administration’s policies.

During this week, investors pulled out a net $4.88 billion from U.S. large-cap funds, in contrast to net purchases of $5.43 billion the previous week. Mid-cap and multi-cap funds also faced outflows totaling $1.2 billion and $751 million, respectively, while small-cap funds saw inflows of $272 million.

Sector-specific funds displayed mixed results, with industrials suffering a notable outflow of $467 million, while communication services and technology sectors experienced inflows of $348 million and $338 million, respectively.

In contrast, bond funds recorded a net inflow of $9.14 billion after three weeks of net sales. General domestic taxable fixed income funds attracted $3.52 billion, the highest investment in nearly a year. Furthermore, short-to-intermediate investment-grade funds, loan participation funds, and short-to-intermediate government and treasury funds gained substantial inflows of $2.62 billion, $2.17 billion, and $2.02 billion, respectively.