Every fortnight, MutualFunds.com provides a snapshot of the performance of some key mutual funds which tries to accurately capture the investor interest in specific areas of the financial markets. The report is aimed at providing a quick overview of the sectors, regions and asset classes that moved in a meaningful manner during the last two weeks.

• Equity funds continued to be shunned by investors, with total outflows over the two weeks ended October 3 intensifying amid a global market sell-off.

• Nearly $18 billion were pulled out from equities in the two weeks ended October 3, almost double the outflows in the prior 14-day period. Meanwhile, bond funds experienced more than $7 billion in inflows. Hybrid mutual funds, which have both equity and bonds, have had $4 billion in outflows, bringing total outflows to more than $14 billion versus $7.4 billion in the prior two weeks.

• U.S. Treasuries have spooked the markets, with yields unexpectedly surging from 3.06% on October 2 to as much as 3.23% three days later. Yields have now stabilized at around 3.15%. To learn how rising interest rates can impact mutual funds, read here.

• Markets have sold off over the past two weeks, with the carnage intensifying over the past week. Rising Treasury yields have been blamed for the sell-off, but U.S. President Donald Trump pointed the finger at the Federal Reserve, calling the institution “crazy” for raising interest rates.

• Inflation in the U.S. is cooling off, likely giving the Fed reasons to think twice before making another move for the fear of not triggering another sell-off. The Consumer Price Index (CPI) rose 0.1% in September versus 0.2% expected. The CPI is up 2.3% year-over-year, falling from 2.7% in the prior month. Meanwhile, core CPI is up 2.2%.

• The U.S. unemployment rate has hit the lowest level in nearly half a century, falling to 3.7% in September from 3.9% previously. However, job growth has slowed, with 134,000 new positions created versus expectations of 185,000.

We provide this report on a fortnightly basis. To stay up to date with mutual fund market events, come back to our news page here.

Broad Indices

• Technology-focused Nasdaq 100 (NASDX) was the worst performer for the past two weeks, losing as much as 6.12%.

• Low volatility instruments have outperformed. Vanguard’s International bond funds (VTIBX) posted the smallest losses for the past two weeks, down 0.37%. VTIBX is also the best performer for the rolling month, down 0.73%.

• For the rolling month, U.S.-focused Vanguard Total Stock Market (VTSMX) was the worst performer, shedding as much as 5.34%.

Major Sectors

• The sell-off was led by technology stocks, with T.Rowe’s global technology benchmark (PGTIX) losing as much as 7.66% in the past two weeks.
• Unsurprisingly, utilities (FKUTX) were the best performers and the only gainers, up 0.27%.
• For the rolling month, the energy sector (VGELX) is still maintaining its crown of best performer and managed to hang on to gains, up 0.16%.
• The materials sector (FSCHX) is the worst monthly performer, tumbling nearly 10%.

Foreign Funds

• Latin America (RLAIX) bucked the trend, gaining 4.65% in the past two weeks, while all other foreign equities were slammed. Investors put their trust in Brazil, as the presidential race is set to be won by Jair Bolsonaro, whose economic adviser, Paulo Guedes, is well-regarded and generates hopes he will put the economy back on track. Latin America equities were the best performers for the rolling month as well, soaring 9.54%.
• Chinese equities (MICDX) were the most beaten up, as a trade war with the U.S. is taking a toll on the stocks.
• For the rolling month, India (WIINX) is the worst performer, down nearly 12%.

Major Asset Classes

• John Hancock’s multicurrency fund (JCUAX) is the only gainer for the past two weeks, as investors found a safe haven in currencies. The fund is up 0.12%.
• BlackRock’s Small Cap Growth Fund (CSGEX) tumbled as much as 10.14% for the past two weeks, bringing monthly losses to 11%. The fund is the worst performer both for the week and the rolling month.
• The commodities fund (DXCTX) is up 0.57% for the rolling month, the only asset class that posted gains from the pack.

The Bottom Line

Jair Bolsonaro’s first-round victory in the Brazilian presidential election has boosted Latin American equities, which largely bucked the sell-off trend. Apart from this bright spot, equities sold off across the board due to an unexpected spike in U.S. Treasury yields. Technology and small-cap stocks were hit the most, while China’s trade war with the U.S. took a toll on the region’s stock market performance.

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