Equity mutual funds experienced more than $24 billion in withdrawals for the two weeks ended December 24, while bond mutual funds enjoyed more than $15 billion in inflows. Domestic equities, large-cap and multi-cap mutual funds were the most hit, while investment-grade bonds were the most sought after asset with nearly $11 billion in inflows. Last time, total long-term mutual funds enjoyed two weeks of net inflows was at the beginning of 2019.
In the U.K., Boris Johnson secured a stunning election victory, allowing him to move forward with a deal to take Britain out of the European Union. The results of the vote also put an end to the idea that a second referendum was possible. Following the elections, the U.K. Parliament approved Johnson’s Brexit deal, paving the way for the country to leave the EU at the end of January.
The dispute between the U.S. and Iran intensified after Iran’s top general Qasem Soleimani was killed in a raid in Iraq. Iran’s Supreme Leader vowed retaliation, raising fears that the conflict could escalate into a full-blown war.
U.S. Chicago purchasing managers’ index (PMI) improved in December but remained in contraction territory at 48.9. A reading above 50 indicates industry expansion. This is the fourth consecutive negative monthly reading.
U.S. ISM’s manufacturing PMI was worse, reaching a low not seen since the 2009 financial and economic crisis. At 47.2, this is the fifth consecutive month of negative readings.
Chinese manufacturing PMI managed to maintain a positive reading for the second consecutive month, albeit slightly over the 50 threshold indicating expansion. Meanwhile, alternative Caixin PMI came in at 51.5 in December, the fifth positive reading in a row.
U.S. Federal Reserve’s minutes showed that policymakers are worried about persistently low inflation and downside risks stemming from weaknesses in global trade, but are likely to maintain interest rates on hold for a while. However, some of the policymakers expressed optimism about the economy’s resilience in the face of global trade weaknesses, particularly the strong job market.
A string of final European services PMIs were resilient, although slightly in decline compared with previous months. The large divergence between manufacturing and services sentiment has been the main theme throughout the entirety of 2019.
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The last two weeks of the year were not kind to chemicals, mirroring their performance for the entire year as many companies faced lawsuits. The chemical sector fund (FSCHX) declined 2.76%.
Meanwhile, Vanguard’s industrials sector fund (VINAX) gained 1.36% these past two weeks.
T.Rowe’s Latin America equities fund (RLAIX) surged 2.57% for the past two weeks, gaining the spot of the top performer. The fund has seen its performance whipsawing for much of 2019 and high volatility, but ended the year up nearly 10%.
India equities fund (WIINX) was the weakest performer from the bunch, seeing a gain of just 0.22%.
Major Asset Classes
Managed futures fund (EVONX) was the best performers from the pack with a rise of 2.16%.
BlackRock’s small-cap mutual fund (CSGEX) was surprisingly the worst performer for the two weeks with a drop of 0.73%. The fund’s performance for 2019 remains strong, however, with an advance of 21%.
The Bottom Line
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