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Opening the door to another leg up?
Opening the door to another leg up?

The final week of May ended with US lawmakers voting to lift the country’s debt ceiling, markets assigning a one-in-three chance that the Federal Reserve will raise interest rates in mid-June and the price of oil testing 18-month lows. Against this backdrop, flows into all EPFR-tracked Equity Funds hit a 17-week high on the back of record-setting inflows to Technology Sector Funds and China Equity Funds absorbed nearly $5 billion.

Off the wires: Bank turmoil is paving the way for even bigger ‘shadow banks’
Off the wires: Bank turmoil is paving the way for even bigger ‘shadow banks’

Turmoil in the US banking industry has persisted into the second quarter, with interest rate hikes, skittish depositors and the scramble for tighter regulation heaping more pressure on major banks. These constraints, as the New York Times suggests, could cause businesses to look elsewhere for loans. Hence, there is a chance that borrowers turn to non-traditional banking or “shadow banking” options that are less constrained by existing regulations. But where does this present an opportunity for investors? In Money Market Funds that invest primarily in short-term, low-risk debt.

Banking on more pain ahead
Banking on more pain ahead

A recession in the second half of the year, triggered by the impact of current interest rates on the real estate sector and the banks that lend to it, is a fearful scenario for investors. This was reflected in the flows for EPFR-tracked Sector Funds during the week ending May 10, with a combined $3.8 billion redeemed from Financial, Real Estate, Energy and Commodities Sector Funds.

Weekly fund flows highlights – 8th May 2023
Weekly fund flows highlights – 8th May 2023

How did markets react to the interest rate hikes from both the US Federal Reserve and the European Central Bank? In a week where nonfarm payrolls in America reported a job increase way above the initial expectations, we use EPFR’s Fund Flows and Allocations data to deep dive into the latest investor sentiment trends.

Monetary squeeze tightens another two notches
Monetary squeeze tightens another two notches

Investors were expecting quarter-point interest rate hikes from the US Federal Reserve and European Central Bank (ECB) in early May. They got them, along with the collapse of another American regional bank, a warning from Treasury Secretary Janet Yellen that the US may not be able to pay its bills in June if the debt ceiling standoff persists and more violent protests against pension reform in France.

Weekly fund flows highlights – 1st May 2023
Weekly fund flows highlights – 1st May 2023

Market news this week are dominated by rumors of another possible interest rate rise from both the US Federal Reserve and the European Central Bank, as well as the latest US job market update. How is money moving in the meantime? EPFR’s Global Head of Customer Solutions, Steve Muzzlewhite, takes a look at our latest fund flow data.