US Stocks Hit Record Highs but Investors Flee, $55.7 Billion Floods Into Money Market Funds

For the week ended August 5, US equity funds turned to net outflows as investors locked in gains following record highs in US stocks and reduced risk exposure ahead of Friday’s release of the July nonfarm payrolls report, awaiting further clues on the Federal Reserve’s (Fed) interest rate trajectory.

Data from LSEG Lipper showed that US equity funds experienced $1.58 billion in outflows during the week, reversing the previous week’s $11.77 billion in net inflows. The S&P 500 index rebounded approximately 6.5% from last week’s low of 7,313.92 points, reaching a record high of 7,793.68 points on Wednesday, primarily driven by strong earnings from companies such as Amazon (AMZN-US), Caterpillar (CAT-US), and Palantir Technologies (PLTR-US).

Markets are closely watching the upcoming July employment report from the US Department of Labor. Economists expect nonfarm payrolls to increase by 80,000 in July, higher than June’s 57,000, with the unemployment rate expected to remain steady at 4.2%. This data will serve as a key basis for markets to adjust their expectations for Fed rate policy.

By fund type, growth-oriented equity funds saw $5.5 billion in net outflows during the week, reversing the previous week’s $3.1 billion in net inflows and becoming the main driver of overall equity fund outflows. In contrast, value funds attracted $1.99 billion in net inflows, reflecting a shift toward relatively undervalued assets.

Sector-focused funds raised capital at a three-week low of $1.62 billion. Technology funds saw only $388 million in net inflows, the lowest in six weeks. In comparison, industrial, healthcare, and consumer discretionary funds attracted $875 million, $866 million, and $708 million respectively.

Hedging demand also rose. US bond funds recorded $6.52 billion in net inflows, significantly higher than the previous week’s $1.26 billion. Money market funds attracted $556.9 billion, regaining investor favor after three consecutive weeks of outflows, indicating that capital is accelerating its shift toward defensive assets ahead of the jobs data release.