Fed May Pause Rate Hikes! Global Funds See Inflows into Equity and Bond Funds – Equity Funds Attract Capital for 12 Consecutive Weeks

Global equity funds continued their momentum of capital inflows, recording net inflows for the 12th consecutive week as of the week ending August 12. Robust corporate earnings, coupled with slower-than-expected U.S. job growth and cooling inflation, led markets to scale back expectations for further rate hikes by the Federal Reserve (Fed), further bolstering investor confidence.

According to LSEG Lipper data, global equity funds saw net inflows of $18.62 billion during the week, up from $17.27 billion the previous week. The MSCI All-Country World Index briefly rose to 1,163.05 points on Wednesday, hitting a new all-time high. The index gained 2.85% for the week, marking its best weekly performance since April 17, driven primarily by strong earnings reports from companies benefiting from the artificial intelligence (AI) investment boom, such as Caterpillar (CAT-US) and Palantir (PLTR-US).

U.S. Labor Department data showed that the Producer Price Index (PPI) for July was unchanged month-on-month, further strengthening expectations that the Fed will hold interest rates steady next month. By region, European equity funds recorded net inflows of $13.52 billion, the largest weekly inflow since July 8. U.S. and Asian equity funds attracted $2.58 billion and $4.13 billion, respectively.

Despite the AI-driven market rally, technology sector funds saw outflows of approximately $1.7 billion, ending six consecutive weeks of net inflows. In contrast, gold and precious metals equity funds attracted $1.6 billion, while consumer staples sector funds recorded net inflows of $609 million, indicating that some investors are increasing defensive positions.

Bond funds recorded net inflows of $18.01 billion during the week, the highest in four weeks. Short-term bonds, euro-denominated bonds, government bonds, and loan participation funds attracted $4.45 billion, $2.57 billion, $2.24 billion, and $1.06 billion, respectively. Money market funds saw net inflows of $28.41 billion, marking the second consecutive week of capital inflows.

In the commodities sector, gold and other precious metals funds recorded net inflows of $2.62 billion, the fifth consecutive week of inflows. Energy funds turned positive after two weeks of outflows, recording net inflows of $434 million. Data covering 28,966 emerging market funds showed that emerging market equity funds recorded net inflows for the fifth consecutive week, reaching $3.45 billion. Bond funds in emerging markets attracted $871 million.