Every fortnight, MutualFunds.com provides a snapshot of the performance of some key mutual funds. The report aims to capture investor interest in specific areas of the financial markets by providing a quick overview of the sectors, regions and asset classes that moved in a meaningful manner during the last two weeks.
Net flows were again hurt by large withdrawals from equities, a figure slightly offset by positive net flows in bonds. For the two weeks ended September 4, a net total of nearly $9 billion were withdrawn from mutual funds.
Equities saw $11 billion in outflows, with domestic and multi-cap equities the least liked categories. The flows in mid-caps and small-caps were only slightly negative.
Total bonds experienced more than $5 billion in net inflows, with investment-grade and taxable bonds among the biggest gainers.
Crude oil markets received an unexpected shock from a drone attack at two Saudi Arabia key oil facilities, in what is expected to be a major disruption to oil prices. Crude surged as much as 20% on Monday but gave up some gains as traders assessed the impact of the strike. Aramco, Saudi Arabia’s state oil company, said it will dip into reserves to keep supply stable, while work to restore production is underway. Analysts expect the disruption could last at least two weeks. The attack could also trigger a larger-scale conflict in the region.
Elsewhere, global stock markets were boosted by additional monetary easing undertaken by the European Central Bank. The monetary watchdog, led by outgoing chief Mario Draghi, cut the interest rate on the deposit facility to a record low of -0.50% and resumed its bond-buying program to the tune of 20 billion euros per month in a bid to reach its inflation target of a little below 2%. If oil prices continue to rise, the ECB’s goal could be attained easily. The bank said it expects interest rates to stay lower at least until the inflation outlook improves.
U.S. manufacturing sentiment for September moved into contraction territory for the first time in three years. ISM’s purchasing managers’ index (PMI) fell from 51.2 to 49.1, as the ongoing trade war between China and the U.S. has dampened sentiment. The fall comes as European manufacturing sentiment indexes have been hovering deep into contraction territory for months.
The U.S. economy added just 130,000 jobs in August, declining from a revised 159,000 in the prior month. Analysts had expected a reading of 163,000. This is the third-lowest figure in more than a year.
The unemployment rate stayed at 3.7%, while average hourly earnings rose 0.4%, beating expectations of 0.3%.
U.K. GDP rose 0.3% in August month-over-month, surpassing forecasts of 0.1% growth.
U.S. inflation slowed to 1.7% in August, largely due to falling energy prices. Core inflation was up 2.4%.
We provide this report on a fortnightly basis. To stay up to date with mutual fund market events, return to our News page here.
International equities funds (VGTSX) were the best performer over the two weeks ended September 13 as monetary easing launched by the European Central bank boosted investor sentiment.
Meanwhile, Vanguard’s total bond market fund (VBMFX) declined more than 2%, the effect of dovishness signaled by key central banks, including the European Union and the U.S.
Sectors were largely mixed, although most of them posted gains.
Vanguard’s financial equities fund (VFAIX) was the biggest gainer for the past two weeks, rising nearly 6%, as rising Treasury yields boosted the sector.
Fidelity’s real estate fund (FRIFX), meanwhile, was the largest decliner, down 1.9%.
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Chinese equities funds (MICDX) gained more than 4%, as a slew of mixed news had a positive overall impact. The easing of trade tensions with the U.S. and the removal of quotas on foreign investment in local stock markets were both positive drivers. Meanwhile, protests in Hong Kong continued to be an overhang, although investors largely ignored the threat.
Indian equities funds (WIINX) were the weakest performer from the pack with a small gain of 0.5%.
Major Asset Classes
PMICO’s long-term bonds fund (PEDIX) lost a staggering 9.7% for the past two weeks, as yields continued to rise.
On the other hand, Blackrock’s small-cap equities fund (CSGEX) recorded the largest gain, up 2.91%.
The Bottom Line
Equities again experienced net outflows these past two weeks, offset by positive net inflows in bonds. Financials, Chinese equities and small-caps were among the biggest gainers, while long-term bonds and real estate equities were hammered. The European Central Bank launched another round of monetary stimulus, while oil supply was disrupted by drone attacks on some Saudi Arabia crude processing facilities.
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