Flows into EPFR-tracked Emerging Markets Equity Funds during the third week of January climbed to their highest level since mid-1Q21 as investors positioned themselves for China’s much anticipated economic rebound and, the anti-inflation rhetoric of the Federal Reserve and European Central Bank (ECB) notwithstanding, an early end to the current interest rate cycles in the US and Europe. Investors also steered $2.5 billion – a 101-week high – into Emerging Markets Bond Funds.
Evidence that inflation is falling and global growth is stalling gave EPFR-tracked Bond Funds a shot in the arm during the first full week of January. Ahead of December’s CPI number, which showed US inflation grew at a 13-month low of 6.45% in the final month of 2022, investors committed over $17 billion to all Bond Funds.
Over $110 billion – a 131-week high – flowed into EPFR-tracked Money Market Funds during the week ending Jan. 4 as investors surveyed an investment landscape still being reshaped by inflation, tighter monetary policy and geopolitical forces.
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.
Overall, the second week of December 2022 saw all Equity Funds record a collective inflow of $17.9 billion while Bond Funds absorbed $2.3 billion.
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.
Given the raft of unsettling news and data thrown at them during the second week of July, investors showed considerable fortitude.
Flows during the first week of the third quarter favored liquidity, with EPFR-tracked Money Market Funds recording their biggest inflow year-to-date. But there were a few signs that investors are willing to test what have been stormy waters for much of the past four months.
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.
Driven by supply chain, labor market and energy supply issues, consumer prices are surging at a rate last seen in the 1970s and 1980s. To what degree this could have been foreseen is the subject of increasingly acrimonious debate.
