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.
Total long-term flows were negative for the two weeks ended July 24, with a big difference between equity and bond outflows.
Investors withdrew a combined $18.2 billion from equity mutual funds, with domestic and large-cap equities suffering most outflows. At the same time, bonds experienced $16.5 billion in inflows, with taxable and investment-grade bonds among the largest beneficiaries.
The European Central Bank strongly hinted that another rate cut could be on the horizon, saying the Eurozone economy still needs a great degree of accommodative monetary policy. The bank said interest rates are likely to stay low at least through mid-2020.
Across the pond, the U.S. Federal Reserve already cut its interest rates a quarter of a percentage point, to a range of 2%-2.25%, and indicated that further rate cuts are likely in order to support a feeble economy.
As expected, Boris Johnson became the Prime Minister of the United Kingdom, triggering fears he will deliver on his promise to take the country out of the European Union without a deal.
The financial markets received another shock after the latest escalation in the trade war between the U.S. and China. After President Donald Trump imposed a 10% tariff on $300 billion of Chinese imports against the advice of a majority of his advisers, China allowed its currency to shrink below the psychological 7 yuan to the dollar level. The ball is now in Trump’s court and the trade war might get uglier.
The European confidence indicators are not showing optimism. Most notably, Germany’s flash manufacturing PMI fell deeper into contraction territory to 43.1 in July, reaching a level not seen since the height of the economic crisis in 2009. Europe-wide manufacturing PMI declined to 46.4, a seven-year low.
U.S. GDP increased by 2.1% in the second quarter, a significant slowdown compared with the 3.1% advance in the prior quarter, although the figure beat expectation of 1.8% growth.
Meanwhile, the Euro area economy expanded just by 0.2% in the second quarter, while year-over-year the GDP advanced 1.1% compared with 1.2% in the previous quarter.
The U.S. labor market remained one of the few bright spots, with the economy adding 164,000 jobs in July, which was in line with forecasts. The unemployment rate remained at 3.7%, while average hourly earnings advanced 0.3%.
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.
Technology equities fund (NASDX) have lost 6.31% for the two weeks ended August 5, as investors pulled out money due to trade war escalation and fears of an economic slowdown.
Amid equity carnage, investors found safety in bonds, with the Vanguard’s total bond market fund (VBMFX) advancing 1.47%.
Equities have experienced carnage these past two weeks, with technology and emerging markets particularly hit. Spooked investors found safety in long-term bonds, which outperformed. The trade war between the U.S. and China escalated, while the European Central Bank and the Federal Reserve were both dovish in the face of weakening economies.
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