- The picture of long-term flows has not changed in the past two weeks, with bonds experiencing strong inflows, offset by equity outflows.
- For the two weeks ended March 20, mutual funds saw $3.1 billion in net inflows. Equities experienced more than $11 billion in outflows, while bonds saw around $16 billion of inflows. Taxable and investment grade bonds were particularly strong, while high yield and global bonds were rather weak. In the equity realm, domestic stocks were particularly hit. All in all, mutual funds experienced the eighth consecutive week of positive flows.
- With respect to Brexit, Prime Minister Theresa May’s third attempt to pass a deal through Parliament failed as expected, while a string of Monday votes showed there is no majority for any kind of deal. A referendum or another election is increasingly a likely outcome, as well as the worst-case scenario of a no-deal Brexit.
- U.S. GDP advanced by 2.2% in the fourth quarter of 2018, lower than the previous estimate of 2.6%. As such, the U.S. annual GDP expanded by 2.9% in 2018 compared with 3.1% previously forecasted.
- Bank of Japan policymakers are rather undecided about the bank’s next steps. While one committee member suggested the central bank should act to increase stimulus and thereby increase inflation, the majority were in agreement that the current stimulus should remain unchanged.
- U.S. retail sales unexpectedly declined by 0.2% in February, driven down by lower consumer expenditures on furniture, clothing and food, among others. Core retail sales dropped by 0.4%. Analysts had expected core sales to rise by a similar amount.
- U.S. Manufacturing Purchasing Managers’ Index (PMI) came in at 55.3, rising slightly from February when it was hovering near two-year lows.
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- Broad indices were rather mixed, with technology stocks and bonds in positive territory and the rest posting negative returns.
- Vanguard’s total bond market fund (VBMFX) rose 1.14% over the past two weeks, as ten-year Treasury yields continued to drop, while an inversion of the yield curve triggered worries about a potential recession.
- International stocks fund (VGTSX) tumbled 0.66%, as a host of bad economic indicators in Europe led investors to dump equities.
- The retail sector fund (FSRPX) was by far the best performer for the past two weeks, advancing 4.19%. The gains were driven by Amazon, the giant online retailer, which surged nearly 6% over the past two weeks. Amazon makes up a third of the index.
- Financials sector fund (VFAIX) were again the worst performers as low-interest rates spurred by falling yields is bad for banks’ business. Financials declined by 3.95%.
Major Asset Classes
- Unsurprisingly, long-term bonds fund (PEDIX) continued to outperform, rising 5.53% for the week.
- At the other end of the spectrum, small-cap stocks fund (CSGEX) fell 0.46%, the biggest decliner from the pack.
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The Bottom Line
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