A final look to EPFR-tracked equity funds in December 2022, with alternative, balanced, bond and money market funds experiencing significant redemptions as investors grapple with a highly uncertain outlook for the first half of next year.
Mixed signals for emerging markets
Despite China’s first steps away from the zero-Covid policies that have sapped its economy and some optimistic forecasts for 2023, investors tapped EPFR-tracked Emerging Markets Equity Funds for $2.4 billion – a 13-week high outflow – in early December 2022.
Darkest just before the dawn?
Given the raft of unsettling news and data thrown at them during the second week of July, investors showed considerable fortitude.
Investors batten down the hatches going into the third quarter
Investors pulled money out of all the major EPFR-tracked fund groups during the final week of June as they closed the books on a quarter that saw inflation in Europe hit record highs, energy prices soar, the US Federal Reserve deliver their biggest rate hike at a single meeting since 1994 and the benchmark S&P Index endure its worst opening half of any year since 1970.
For investors, light dims as solstice approaches
The Northern hemisphere’s summer solstice, which occurs on June 21, marks the day when it is light for the longest period. In the week preceding that date, however, investors could be excused for thinking the solstice marks the period of maximum darkness. The US Federal Reserve’s first 75-basis points rate hike since 1994, Russia’s invasion of Ukraine moving into its 17th week, Chinese authorities scrambling to contain a ‘ferocious’ outbreak of Covid in Beijing and an emergency meeting of the European Central Bank (ECB) kept global markets firmly on the back foot during the week ending June 15.
Investors test the floor for US assets
Although the flow of unsettling developments continued in late May – will Covid-19 pass the baton to Monkeypox? – investors recovered some of their appetite for exposure to US assets. The week ending May 26 saw EPFR-tracked Equity Funds snap their longest redemption streak since 3Q19 thanks to the biggest flows into US Equity Funds since the second week of March while US Bond Funds posted only their second inflow during the past eight weeks.
China: Locked down but not out
As key US indexes closed their books on a month that saw the Nasdaq record its biggest drop since October 2008, investors seeking to escape market volatility turned to cash and to Chinese equity. Flows into EPFR-tracked Money Market Funds hit a 27-week high during the fourth week of April while China Equity Funds recorded their 15th inflow in the 17-weeks year-to-date and their biggest since late January.
Sector Rotation: Post-Covid still in the future
Flows and allocations to different sectors and sector-related fund groups over the past 14 months have been marked by conviction, record inflows – and sharp changes of direction. EPFR’s data also captures some significant thematic shifts.
Risk takes a holiday as pandemic’s latest wave saps festive spirits
With major central banks responding to rising inflation, investor focus shifted during the third week of December to the Covid-19 pandemic’s latest iteration and the measures being taken to contain it. Those measures, self-imposed and mandated, promise to dent consumer and business confidence going into the New Year and weighed on flows to many EPFR-tracked fund groups.
Inflationary noose tightens and Omicron cuts loose in mid-December
The jury is still out on the impact of rising Covid caseloads triggered by the Omicron variant, but the latest round of inflation numbers delivered a verdict of “not transitory” that major central banks are expected to heed. The Bank of England was the first to respond, raising its key rate, and reinforcing the perception that the US Federal Reserve will accelerate its timetable to wrapping up its current quantitative earing program.