Investors Rally to Global Equity Funds

Feb 20 – In the week leading up to February 18, investments in global equity funds saw their largest influx in five weeks. This surge seems driven by a shift in investor preferences towards stocks and other sectors, alongside renewed optimism surrounding potential interest rate cuts by the Federal Reserve, which has positively influenced U.S. growth sentiment.

During this week, investors directed $36.33 billion into global equity funds. This marks the highest weekly inflow since January 14, according to data from LSEG Lipper.

Recent U.S. consumer price data revealed that inflation rose by 2.4% in January compared to the previous year—close to the predicted 2.5% increase. This reinforces speculations that the Federal Reserve may implement two interest rate cuts this year.

European funds topped regional inflows with $17.22 billion, closely matching the previous week’s figure of $17.68 billion, buoyed by a record high in the STOXX 600 index.

Investment in U.S. funds totaled $11.77 billion, bouncing back from last week’s outflows of $1.48 billion, while Asian funds attracted net inflows of $3.8 billion.

Sector-wise, there was noticeable interest in industrials, metals and mining, and technology, with net inflows of $1.82 billion, $818 million, and $696 million, respectively.

Global bond funds experienced a seventh consecutive week of net inflows, raising $19.79 billion. Short-term bond funds saw an influx of $5 billion, their largest since December 24. Additionally, euro-denominated bond funds and corporate bond funds reported net purchases of $2.54 billion and $2.35 billion, respectively.

Money market funds recorded inflows of $7.05 billion, maintaining a trend of inflows for four weeks straight. Conversely, gold and precious metals funds faced net outflows of $1.86 billion, marking five weeks of declined interest.

In the realm of emerging markets, equity funds gathered $8.1 billion, pushing year-to-date inflows to $56.52 billion. However, bond funds saw a withdrawal of $1.94 billion in net purchases for the second consecutive week, drawing from data involving 28,639 funds.

Elias Hilmer, a market economist at Capital Economics, remarked on the current situation: “The recent lag of U.S. tech stocks compared to emerging markets feels reminiscent of the dot-com era. Still, I think the momentum in AI has further potential.” He added, “Even so, I believe emerging market stocks will likely fare better than those in the U.S., even if the AI bubble loses steam.”